What is Days Inventory Outstanding (DIO) and Its Formula

Days Inventory Outstanding o DIO ay maaaring bago pa lamang sa iyong pandinig. Kung nais mong mas maunawaan ang mga detalye tungkol sa DIO, nasa tamang artikulo ka!

Filipino businesses should know what Days Inventory Outstanding (DIO) is and how to calculate it. As part of inventory software, the use of this system in the Philippines makes 56% of orders delivered on time. Furthermore, the days inventory formula also shows how long your inventory stays before it’s sold.

For retail businesses, DIO is also essential to keep track of your inventory and make sure it’s in good condition. You can use inventory software to automate this process. But, let’s find out more about what days inventory is outstanding.

What is Days Inventory Outstanding (DIO)?

Days Inventory Outstanding (DIO) is a financial ratio that tells you how long your business keeps inventory before selling it. It helps you see how much it costs to hold onto the inventory management system Philippines and why there might be delays in selling it.

DIO can also show how efficient your business operations are. A lower DIO means you’re selling your inventory faster. On the other hand, a high DIO could mean your inventory isn’t moving as fast, which can be a warning sign for your cash flow.

Days Inventory Outstanding Formula for Business with Example

DIO formula is very simple:

DIO = (Average Inventory / Cost of Sales) x Number of Days

Here’s what you need to count days inventory outstanding formula:

• Average inventory: The value of your stock over a certain period.
• Cost of sales: The amount spent on producing the goods you’ve sold.
• Number of days: The total days in that period (e.g., 365 days for one year).

For example, if Company A has average days in inventory formula of P60,000 and the cost of sales is P300,000 over a year, the DIO calculation would look like this:

DIO = (60,000 / 300,000) x 365 = 73 days

This means it takes Company A about 73 days to sell its inventory.

How to Improve Days Inventory Outstanding (DIO)?

Business people, if you’re business facing a high DIO, it means you need to lower it down. For Filipino businesses, reducing DIO can significantly improve overall operations and financial health which can be done in steps:

• Keep stock levels balanced: Maintaining the right amount of stocks using an inventory management system ensures you have enough to meet customer demand without having too much that sits unsold.
• Improve forecasting and planning: Accurate forecasting helps avoid overproduction or overstocking. By planning better, you can align your inventory formula accounting with actual customer demand.
• Speed up the sales process: Streamline your sales processes by enhancing customer service, simplifying the buying experience, and offering faster delivery options.
• Use effective marketing: Boost demand through targeted marketing campaigns. Whether through online promotions or in-store discounts, effective marketing strategies can help move inventory faster.
• Get rid of outdated stock: Use promotions, discounts, or bundles to clear out old or underperforming inventory. Offering incentives like free shipping or “buy one, get one” deals can help you sell off these items and free up space for new stock.

Manage Your Days Inventory Outstanding Quickly with HashMicro’s Inventory Management

HashMicro is widely known as an inventory software vendor in Southeast Asia. Established in Singapore in 2015, HashMicro stands out with the most comprehensive features among others. Ngunit, bakit kailangan namin ng imbentaryo ng software mula sa HashMicro para lang mabilang ang DIO?

In this economic world, using software can’t be your second choice again. The fast-moving trends, customer needs, and the global market can make your business suffer in no time. Therefore, business people who are still unsure about the using of days in inventory formula software, they choose to start it with a free demo.

With the free demo, you can discover the performance of the inventory software features that HashMicro offers to you, such as:

• Stock forecasting: A days sales in inventory formula system that analyzes historical sales data, seasonal trends, and other factors to predict future demand for goods.
• Integration with accounting system: Linked to an accounting system that does financial work automatically, accurately, and in real-time. Help you get through the calculation stage with minimal error.
• Fast and slow-moving stock analysis: Helps identify products in the warehouse that have high and low turnover rates to enable strategic planning such as eliminating unsold items, etc.
• Pick, pack, delivery: Warehousing management method to manage the process of taking goods from the warehouse, packaging goods, and delivering goods to customers.

With these features on your businesses, you will see how easy is managing a days inventory outstanding or DIO. If you consider trying the free demo, sign up now and discover the easiest way to run your business from anywhere.

Conclusion

Understanding your average days in inventory formula is crucial for running a successful business in the Philippines. It helps you see how long your inventory lasts and when it turns into sales. With this insight, you can make better decisions for your business and avoid losses.

Using inventory management software, like HashMicro, is a smart way to streamline your days sales in inventory formula. It automates tracking and managing, so you always know where your stock stands. Try it out for free starting today and gawing mabilis ang iyong negosyo.

FAQ About Days Inventory Outstanding

• What is a good number of inventory days?

  To effectively manage inventory and balance between overstocking and understocking, many experts suggest that an ideal Days Sales of Inventory (DSI) falls between 30 and 60 days. However, this range can differ depending on the industry, company size, and other factors.

• Is a higher days inventory outstanding better?

  In general, the lower a company’s DIO, the better. A low DIO indicates that the company can sell its inventory quickly and efficiently. This is beneficial because it reduces costs related to holding inventory, such as storage expenses.

• What is the difference between days on hand and days inventory outstanding?

  Inventory days on hand is a metric that indicates the average number of days needed to sell all the units of a product currently in stock. It is also referred to as days inventory outstanding (DIO) or days sales of inventory (DSI).