How to Cash in on Your Excess Inventory

Business.com / Sales / Last Modified: February 22, 2017

Excess inventory can be a serious financial drag for any business. But what to do with excess items -- no matter what they are or where...

Excess inventory can be a serious financial drag for any business. But what to do with excess items -- no matter what they are or where they came from -- can be a difficult dilemma. Selling what you have through normal channels -- special sales, for example, or online -- may be out of the question. After all, the reason you have the surplus is because your regular outlets haven't done the job.

And you probably have little patience for continuing to carry the extra load. But there are several tactics that can either net you a cash return on your items, or a nifty tax write-off. And some of those services are places you can buy as well as sell excess inventory. Your five basic choices are:

  1. Sign up to sell in bulk in a business-to-business inventory liquidation marketplace.
  2. Sell everything at once to an "instant" liquidator.
  3. Sell small quantities at sites targeting consumer volume sales.
  4. Launch an online sales channel for your business on eBay.
  5. Donate qualified items to a charity and earn a tax deduction of up to twice the cost of the goods.

 Here's where you can go to get it done, depending on what goods you have on hand and in what quantities:

Unload in bulk, business-to-business: Retailers, wholesalers, manufacturers, distributors and others can sell goods via centralized liquidation auctions. For example, Liquidation.com is a b2b bulk marketplace where companies sell all kinds of excess goods. Liquidation.com welcomes inventory from small businesses to sell on this auction marketplace, and has a track record of providing returns higher than other liquidation methods.

Net instant cash on your excess inventory: You can avoid the bother of auctions by selling to a surplus inventory liquidator. InstantLiquidators.com, MerchandiseUSA.com and Power Retailing (www.retailing.com) all buy a wide range of customer-returned and excess inventory. Excess Technologies (www.excessi.com) is a professional surplus inventory liquidator.

Open a sales channel for your business on eBay: Opening a business selling account on eBay can be a great way to sell some of your excess inventory at competitive prices. Setting up your business sellers account is free and simple. Be sure to download the 25-page New Business Seller Guide (PDF) which walks you through the process with tips and advice. Visit www.ebay.com/sellerinformation to get started.

Donate your goods for a juicy tax deduction: Your incorporated business can earn an above-cost, federal income tax deduction, clear out warehouse space, avoid liquidation nightmares and help schools and nonprofits at the same time. The National Association for the Exchange of Industrial Resources (www.naeir.org) takes donations of new, overstock or discontinued product and redistributes it to schools and nonprofit groups nationwide.

Donor companies can receive an enhanced income tax deduction of up to twice the cost of the goods, courtesy of Internal Revenue Tax Code Section 170 (e)(3). NAEIR takes donations of general, consumer goods such as school and office supplies, toys, games, building materials, clothing, tools, and much more. NAEIR also provides the paperwork to aid in filing taxes.

You can deduct cost, as carried on your books, plus half the difference between cost (basis) and the fair market value, except that the tax deduction cannot exceed twice the cost. For example, items carried on the books at a cost of $100 that have an established fair market value of $200 may be donated and a deduction of $150 may be taken. If however, those items carried at a $100 cost have an established fair market value of $300, they may be donated and a deduction of $200 may be taken.

Plan Ahead:  To avoid this problem in the future, consider using inventory management software to keep better track of your goods. Fishbowl Inventory is the best-selling inventory solution for small business that integrates easily with QuickBooks.

Fishbowl Inventory was designed to provide inventory control for wholesalers, distributors, manufacturers and retailers that use QuickBooks. Fishbowl provides advanced features including multi-location inventory control, order management, expiration dates, serial and lot number tracking and point of sale functions. It's available directly from Fishbowl (www.fishbowlinventory.com) or through software resellers.

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