How can I tell if a kitchenware store’s slow-moving gadgets tie up cash?

Ask for a stock list with the date each item arrived or was last sold. Sort by age. A pile of single-purpose gadgets that arrived long ago tells you something the total stock figure hides.

Next, look at how the books value that stock. If old items remain at full cost, the reported figure may be generous. Ask your accountant how write-downs should be handled and what the seller has done before. One more test is to ask what the shop would receive if it cleared the slow items at a discount. You do not need an exact answer, but the seller’s reaction shows whether they have thought about the problem.

Then check the money side. Look at supplier balances, the credit line and how the owner pays for new orders. A shop that is short of cash while shelves are full is usually carrying too much slow stock. Compare cash flow in quiet months to the stock level. Finally, ask about the owner’s habits. Do they clear gadgets through sales, bundles or returns to suppliers? Do they keep buying novelty items that look good but do not sell? Walk the shop and note what looks dusty. Your own eyes confirm what the records suggest.

Key takeaways

• Sort stock by age and sales history, not only by total value.
• Ask how the books treat old gadgets and past markdowns.
• Compare cash strain in quiet months to what sits on the shelves.