Picture two shops on the same street, selling roughly the same amount every month. One owner pays suppliers on time and has cash for the festive season. The other is always short, even though the shelves look full.
The difference is usually sitting on those shelves. Stock that doesn't move, stock that runs out at the wrong moment, and stock that the system says is there but isn't. Sales figures won't show you any of that. Inventory KPIs will.
In short: if you track nothing else, track stock turnover, sell-through, stockouts and stock accuracy. The other eight help you set reorder levels, judge suppliers and decide which product lines deserve your money. Formulas for all twelve are below, with a plain example for each one that needs it.
One piece of advice before the formulas: compare each number with your own last month and last year first. Your category, your suppliers and your town matter more than any general benchmark.
Group 1: Is my cash moving?
1. Stock turnover
Formula: cost of goods sold ÷ average stock value (at cost)
How many times you sold through and replaced your stock over a period. Higher generally means cash comes back to you faster.
Example: if you sold goods that cost you 240,000 over the year and held 40,000 worth of stock on average, turnover is 6. You sell through your stock about every two months.
2. Days of stock on hand
Formula: (average stock value ÷ cost of goods sold) x number of days in the period
The same idea as turnover, expressed in days, which is easier to act on. Using the example above over 365 days, you hold about 61 days of stock. If that number keeps rising month after month, stock is arriving faster than it's leaving.
3. Sell-through rate
Formula: (units sold ÷ units received) x 100
Of what you brought in, how much actually sold in the period? Useful for seasonal stock such as school uniforms before term or decorations before the holidays, and for anything with an expiry date. Low sell-through on a line that customers do ask for often points to price or placement rather than demand.
4. Gross margin return on stock (GMROI)
Formula: gross profit ÷ average stock cost
For every unit of money tied up in stock, how much profit came back? A result above 1 means the line earns more than it costs you to hold it. Compare product lines against each other: this is the KPI that tells you which ones to grow and which to drop.
5. Stock-to-sales ratio
Formula: stock value at the start of the period ÷ sales for the period
Are you holding the right amount of stock for the pace you're selling at? Decide on a comfortable range for your shop. When the ratio climbs above it, slow your orders or run a promotion.
Group 2: Will I have it when the customer asks?
6. Reorder point
Formula: (average daily sales x supplier lead time in days) + safety stock
The stock level at which you place your next order. Set it too high and you overstock; too low and you run out before the delivery arrives.
Example: you sell 10 packets a day, the supplier takes 4 days, and you keep 15 as a buffer. Reorder at 55.
7. Safety stock
Formula: (highest daily sales x longest lead time) − (average daily sales x average lead time)
Your buffer for a busy week or a late lorry. It isn't waste; it's insurance. For essential lines, such as common medicines in a pharmacy or bread flour in a bakery, getting this right matters more than almost any other number.
8. Stockout rate
Formula: (number of times products hit zero ÷ number of products tracked) x 100
Every stockout is a sale you couldn't make, and sometimes a customer who tries the shop next door and stays there. Track which products run out most often; they need a higher reorder point or a more reliable supplier.
9. Supplier fill rate
Formula: (orders delivered on time, complete and correct ÷ total orders) x 100
This one is about your suppliers rather than your shop. A supplier who regularly delivers late or short gives you a clear reason to renegotiate, keep more safety stock of their lines, or find a second source.
Group 3: Can I trust my numbers?
10. Stock accuracy
Formula: (products counted that match the system ÷ total products counted) x 100
Every other KPI rests on this one. If the system says 50 and the shelf has 35, your reorder points, margins and stock value are all wrong. Regular counts, scanning barcodes rather than typing, and limiting who can adjust stock are what keep it high.
11. Shrinkage rate
Formula: ((stock value the system expects − stock value counted) ÷ stock value the system expects) x 100
The gap between what you should have and what you do have. Most of it is ordinary: breakages not recorded, short deliveries signed for, transfers that never arrived, expired goods thrown away without a record. Our guide to [preventing inventory shrinkage](/blog/prevent-inventory-shrinkage/) covers how to find the cause and close it.
12. Carrying cost
Formula: (total cost of holding stock for the year ÷ average stock value) x 100
What it costs you to keep stock: rent for storage space, security, insurance, spoilage, and the cash you could have used elsewhere. Owners are often surprised how high this comes out once it's added up honestly. It's the best argument for ordering a little more often and a little less each time.
How often to look at each
| How often | KPIs |
|---|---|
| Daily | Stockouts, products at their reorder point |
| Weekly | Sell-through, spot checks on stock accuracy |
| Monthly | Turnover, days of stock, shrinkage, GMROI |
| Every quarter | Carrying cost, supplier fill rate, stock-to-sales, review reorder points and safety stock |
Start with the daily and weekly numbers. They catch problems while there's still time to fix them. The monthly and quarterly ones shape what you buy and how you deal with suppliers.
Making the numbers easy to get
Most of these KPIs need the same few ingredients: what you sold, what it cost, what you received, and what you counted. When those live in four different notebooks and spreadsheets, nobody calculates anything.
In EliteTeQ, stock moves with every sale, return, delivery, transfer and recorded damage, so the system figure stays close to the shelf. You can set a reorder point per product and get low-stock alerts. Product movement reports show exactly where a gap came from, and stock counts can be run by category or branch. If you have several branches, you see all of them in one view and can move stock to where it sells before you reorder. Pricing starts from USD 499 per year.
If you'd like to see these numbers on your own product list, book a free demo, or talk to a real person on WhatsApp.
Frequently asked questions
What is the most important inventory KPI for a small shop? Stock turnover, because it ties buying, selling and cash together in one number. Add stockout rate and stock accuracy next.
How often should I count stock? A full count once or twice a year is common, but it's disruptive and often rushed. A better habit is counting a different category each week, so the whole shop is checked several times a year without closing.
What is a good stock turnover figure? It depends on what you sell. A grocery turns over much faster than a furniture showroom. The most useful comparison is your own trend over time, and between your own branches.
What's the difference between shrinkage and spoilage? Shrinkage is any stock you've lost without a sale: breakage, errors, short deliveries, theft. Spoilage is one part of it: goods that expired or went off before they sold. Track spoilage separately, because it's usually fixed by better ordering and [FEFO rotation](/blog/what-is-fefo/), not by security.
Can I track these across several branches? Yes. Calculate each KPI per branch, then compare them side by side. It quickly shows which branch is overstocked, which keeps running out, and where to look first.
Let's discuss how EliteTeQ POS can help you achieve the results you just read about.