Bramvia — Business Central Experts
How many days your stock sits before it is sold, and how many times a year it turns. Both formulas, a worked example, how they relate and how to improve them without running out of stock.
Short answer: days inventory outstanding (DIO) is how many days your stock sits before it is sold; inventory turnover is how many times a year it is renewed. DIO = inventory ÷ cost of goods sold for the period × days, and turnover = annual cost of goods sold ÷ average inventory. With $1.4M of stock and $1.8M cost of goods sold in a quarter, DIO is 70 days and turnover is about 5 times a year.
Next step: see stock days by business unit and month in the dashboard below (Day ratios tab), and the stock simulator to test how much stock you really need.
The formulas
DIO = Inventory ÷ Cost of goods sold in the period × Days in the period
Inventory turnover = Annual cost of goods sold ÷ Average inventory
They are two views of the same thing: DIO ≈ 365 ÷ turnover.
Worked example
| Amount | |
|---|---|
| Inventory at the end of September | $1,400,000 |
| Cost of goods sold July to September | $1,800,000 |
| DIO | 1.4 ÷ 1.8 × 90 = 70 days |
| Annual cost of goods sold (4 × 1.8) | $7,200,000 |
| Turnover | 7.2 ÷ 1.4 ≈ 5.1 times a year |
Cutting DIO from 70 to 60 days frees about $200,000: ten days of cost of goods sold ($20,000 a day).
How to read them
- Compare by family, not just in total. A fast-moving range can hide a slow one.
- Look at the slow movers behind the average: stock with no movement in 180 days or more is cash that will not come back on its own. See dead stock.
- Do not chase a number at any cost: too little stock means stockouts and lost sales.
How to improve them
- Set reorder points from real demand and lead times, not from habit. See buffer inventory.
- Review slow movers every month and act: return, discount or stop buying.
- Shorten supplier lead times or order more often in smaller quantities.
- Remember what stock costs to hold: usually 20% to 30% of its value a year. See inventory carrying cost.
DIO in Business Central
The inventory valuation report gives the stock value at any date; item ledger entries give cost of goods sold; planning parameters (reorder point, safety stock, lead time) live on each item. The dashboard above turns them into stock days by business unit and month.
FAQ
Ending or average inventory? Average inventory is more accurate for turnover; ending inventory is fine for a monthly DIO if you always use it.
What is a good turnover? It depends on the sector: fresh food turns weekly, spare parts a few times a year. Compare against your own history and your peers, not a generic figure.
How does DIO fit in the cash conversion cycle? It is the first term: see the cash conversion cycle.
Related: days sales outstanding (DSO) and days payable outstanding (DPO).
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