How to Analyze Inventory Turnover with Excel: A Smart Metric for Retail & E-commerce Growth

How? Use Inventory Turnover to Improve Cash Flow and Operations

Inventory can quietly drain your cash if not managed well. Whether you run a boutique, food business, or online shop, tracking how fast your inventory sells—also known as inventory turnover—can help you reduce waste, avoid overbuying, and improve profitability.

Here’s how to calculate it using Excel and why it’s a KPI worth checking monthly.

Analyze Inventory Turnover with Excel

What Is Inventory Turnover?

Inventory Turnover Ratio = Cost of Goods Sold (COGS) ÷ Average Inventory

• COGS is the total cost of goods sold over a time period (monthly or annually).

• Average Inventory:

= (Beginning Inventory + Ending Inventory) ÷ 2

A high turnover means products are selling quickly. A low turnover might mean cash is tied up in unsold items, or you're ordering too much too often.

Setting Up the Formula in Excel

Step 1: Gather Your Data

You’ll need:

• Beginning inventory value

• Ending inventory value

• Total COGS (for the period)

Step 2: Create These Cells

A	B
Beginning Inventory	12,000
Ending Inventory	8,000
COGS	30,000

Step 3: Add the Formula

• In a new cell, calculate average inventory:

= (B1 + B2)/2

• Then calculate turnover:

= B3 / [Average Inventory Cell]

Visualize Trends

Add a column for each month and repeat the calculations.

Use a line chart to see turnover fluctuations. This can help spot when you're overstocking, underpricing, or dealing with slow sales cycles.

Line Chart

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Try This Today

Open your inventory and sales data for the past 3–6 months. Calculate your monthly turnover. Look for patterns: Are you consistently holding too much stock in one category? Are seasonal dips affecting performance?