You know your stock is “a bit heavy” in some places and thin in others, but you can’t say how much money that is. Three simple numbers turn that feeling into something you can act on this week. Here’s how to calculate each one in plain English, with a worked example you can copy.

How do I calculate inventory turnover?

Divide cost of goods sold by average inventory for the period. In a worked example, S$100,000 of cost of goods sold over S$10,000 of average stock gives 10 turns a year (Practical Ecommerce, 2020).

Cost of goods sold is what you paid for the items you sold. Average inventory is the value of your stock, averaged across the period, usually by adding the opening and closing values and halving them. A higher number means your stock is selling and being replaced more often, so your cash isn’t parked for long.

What counts as a good turnover number?

There’s no single target. It varies by industry, and strong performers turn stock over more often than peers in the same category, according to Practical Ecommerce.

So don’t chase someone else’s number. Calculate your own turnover for each product group, then watch the trend. A group that used to turn eight times a year and now turns five is telling you something has changed.

What are carrying costs?

Carrying costs are the cost of holding stock: warehousing, storage, staff, interest, and “leakage” such as theft, breakage and spoilage. They don’t appear on a single line of your accounts, which is why they’re easy to ignore.

Every unit that sits unsold collects a little of each cost. Rent for the shelf, time spent counting it, the loan interest on the money used to buy it. Slow stock isn’t free; it just bills you quietly.

What’s a quick way to estimate carrying costs?

A common retailer rule of thumb is total inventory cost divided by four, so S$100,000 of annual inventory cost implies roughly 25%, or about S$25,000, in carrying costs. It’s an estimate, not a standard (Practical Ecommerce, 2020).

Practical Ecommerce attributes the rule only to “many retailers” and doesn’t cite a study, so use it to size the problem rather than to report an exact figure. If your real costs are very different, such as expensive rent or fragile goods, trust your own numbers.

A common retailer rule of thumb puts carrying costs at roughly 25% of inventory cost, so S$100,000 of stock costs about S$25,000 a year to hold (Practical Ecommerce, 2020).

What is opportunity cost in stock?

Opportunity cost is the cost of tying up money in the wrong stock, such as overbuying a slow seller while a fast one runs out. It’s the sale you didn’t make because the cash was somewhere else.

You won’t find it on a report. You find it by asking, each time you reorder, “What else could this money have bought?”

How should I decide what to buy more or less of?

Sort items into three groups: fast-moving high-profit, slow-moving high-profit, and slow-moving low-profit. Buy more of the first, hold the second, and cut the third, according to Practical Ecommerce’s SKU rationalisation method.

A SKU is just one distinct product, such as one size of one shirt. Print your product list, sort it by units sold and margin, and you’ll usually find a handful of fast sellers carrying the shop and a long tail of items that rarely move.

How much of my money is probably tied up in stock?

For most small retailers, inventory ties up 20% to 60% of business capital, according to the Global Payments 2025 Retail Inventory Report of 200 small retailers. That’s a wide range, and it depends on what you sell.

Here’s the practical way to think about it. If stock is a third of your capital, a 10% improvement in turnover frees real cash. It’s often the cheapest “funding” a small shop can find.

Inventory ties up 20% to 60% of business capital for most small retailers, which is why turnover is worth tracking (Global Payments, 2025).

How many small retailers still count by hand?

Over half of small retailers still rely on manual counts, according to Global Payments (2025). That matters because turnover and carrying costs are only as accurate as the last count.

If your stock figure is a month old, your turnover figure is a month old too. Counting more often, or letting a system update the count with every sale, is what makes these three numbers trustworthy.

Over half of small retailers still rely on manual counts, so their turnover figures are only as good as the last count (Global Payments, 2025).

What does a missing item really cost?

Rushing one missing item back into stock can cost up to US$150, according to Global Payments (2025). That’s the price of a miscount: expedited shipping, a staff trip, or a lost sale.

Opportunity cost shows up here in a concrete form. The cash you spent on slow stock wasn’t available when the fast seller ran out.

How big is the overall cost of getting stock wrong?

Overstocks plus out-of-stocks cost retail about US$1.7 trillion a year, or 6.2% of sales, and out-of-stocks are the bigger share at 65.6% (IHL Group, via Retail Insight Network, 2026). Those are global figures, not a Singapore number.

The three numbers above are how you shrink your own slice of that. If you’d rather not rebuild the figures by hand each month, Asalta Inventory keeps one live stock count across stores, websites and marketplaces, which makes turnover and carrying cost easier to trust. It’s one option to look at, and the calculations above work with a spreadsheet too. You can read more on the Asalta Inventory page.

Key Takeaways

• Start with turnover: cost of goods sold divided by average inventory, such as 10 turns in the S$100,000 example.
• Estimate carrying costs: a rule of thumb of roughly 25% of inventory cost, treated as an estimate.
• Watch opportunity cost: overbuying slow sellers can starve fast ones.
• Know your capital: stock ties up 20% to 60% of capital for most small retailers.
• Keep counts fresh: over half of small retailers still count by hand.