Why do we calculate inventory ageing?

Dear Mayur

The management always needs to have inventory ageing for the following specific reason

1) Inventory is  an investment  in current assets. so the funds get blocked in inventory . which  would  have been otherwise diverted for other expenses

2) At time without the knowledge of top managment the investment might  have been made. especially in a manufacturing sector if this is so then it would draw the attention of managment   in the form of internal audit report or  management report

If the price details are missing then the report generated from ERP  it might be misleading or incorrect. If  any of these  issues are present in ERP. we need to understand  that there is a bug in the software which needs to be corrected

3)

Inventory ageing is required to identify slow moving/ non moving inventory items and make appropriate provision in the books in case they have lost their market value. If ageing and prices generated by ERP are misleading/ missing, you need to immediately escalate this to the top management of the company as well as partner of your firm handling this account. Also, please check how inventory was valued in the previous year/ at the time of last closing of accounts and how these inaccuracies were dealt with. Also, try to judge whether this is a technical issue only of ERP or that of management integrity to give a misleading picture. Please have discussions among your senior team members and decide about making appropriate recommendations.