Fabric Stock Ageing, Provision & Clearance Sheet

How to read this sheet

Two questions are answered separately because they have different answers. The provision is what the stock would realise today against what it is carried at, and it does not depend on anybody's intentions. The clearance decision is a forward comparison: what a lot fetches now against what keeping it nets after the cost of keeping it, where a lot that will genuinely be used is valued at what replacing it would cost, since using it is a purchase avoided. Expected use is the input that decides almost every row and it is the one most easily answered dishonestly - it is the share somebody has an actual plan for, not the share that could conceivably be used one day, and entering the second turns this sheet into a justification for keeping everything. Capital is charged on the average realisable value over the horizon rather than on cost, because the money genuinely at risk is what could be recovered by selling today and not what was paid in a previous year. Decay is applied to the realisable value and compounds monthly; for fabric it is rarely smooth, since a lot loses most of its value at the moment it can no longer be shade matched or the season it belonged to ends, so the monthly figure is a convenience and the realisable percentage entered today is the more reliable of the two. Nothing here models the customer who will pay full price for exactly this lot next month, the cost of the shelf space in a store that is not full, or the relationship damage of clearing a branded fabric into a market the brand also sells in - the last of which is a real constraint on clearance and is not a number.