Taking out the Trash: Disposing of Equipment Excess after Inventory

Posted by Ashley Little on July 9, 2014

excess-inventoryMost businesses keep spare equipment and other operationally important items on hand to ensure they are providing services, day after day, month after month without interruption.. Whether stored in warehouses, stashed at corporate headquarters, or distributed amongst trucks in the field, the parts and pieces are numerous—and notoriously difficult to keep tabs on. Conducting thorough inventories on a regular schedule and then cataloging all assets using robust inventory management software is highly recommended. But what if an inventory turns up excess?

Excess can take a number of forms, from outdated equipment to broken and unfixable items to duplicates that exceed a company’s designated min/max or safety levels. As with many things, less is often more when it comes to hanging on to equipment. Take a look at several reasons disposing of excess assets could be in a business’ best interest.

Too much spare equipment actually costs your business money

Having too many of an item—or many items—in inventory can impact a business’s bottom line in a number of ways. First, organizations must pay ad valorem tax on all items in inventory, whether those items are useful or not. If they are not being used, why pay? Secondly, equipment excess costs investment opportunity by tying up a business’s money in unused or unusable equipment—capital that could be put to use elsewhere or grown via smarter investment.[1] Storage for any and all items costs as well. Management of spaces needed to store equipment as well as upkeep on storage locations and resting equipment is another spend that removing excess can diminish. Finally, keeping too much “stuff” around generally depresses a business’s financials overall. Why? Money tied up in idle items is money that is going nowhere and doing no one any good.

Spare equipment takes up valuable space

Excess equipment occupies valuable real estate both physically and financially. Warehouses full of obsolete and unneeded equipment could be filled with working, beneficial items, or excess items may be repurposed or sold. Secondly, removing an asset from a company’s warehouse and its books offers the opportunity to obtain useful capital—the type that can be placed back into the business.

Disposal can have hidden benefits

If an item is sitting unused, why not sell it? Consider the telecommunications industry, for example, where there is a thriving secondary market for used equipment made obsolete by technological advances in our country. Emerging nations will often pay top dollar for these older technologies, boosting revenue for the selling company. In addition, some equipment may also be appropriate for donation, an activity that builds community goodwill and offers tax benefits.

More is not always more when it comes to your spares inventory. Know your safety levels, meet them and keep a well-stocked business, but know the pitfalls of having too much. No business wants to be considered for an episode of Hoarders, or pay financially for the fallout of hanging on too long when there are sound financial and operational reasons to let go.

[1] http://www.imsconsulting.ca/?r=26

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