Unwanted Inventory - Is it Better in the Landfill or as a Charitable Donation?

By Gary C. Smith.

Inventory management is a headache for many businesses. Order too little and you disappoint customers. Order too much and you have a warehouse full of unneeded merchandise.

As a CPA, you may be hearing these woes from clients who are faced with overflowing warehouses or shelves and wondering what to do. Discount it? Sell it to a consolidator? Put it in a landfill? If you’re advising a client in that quandary, tell them about product philanthropy, also known as in-kind donations.

A client’s non-value-added product or inventory has value to somebody. Your client could do the legwork of identifying eligible nonprofits, but a gifts-in-kind organization will find homes for unwanted merchandise with qualified 501(c)(3) organizations including schools, churches, civic organizations and retirement homes.

The benefits of working with a gifts-in-kind donation organization:

Accountability: They keep detailed records of merchandise donations and redistribution and a tracking report is available upon request.
Brand protection: Business owners don’t have to worry about brand devaluation or damage to suggested retail price.
Ease of donation: As soon as it approves a donation, (typically within 24 hours or less) the business owner can clear out excess inventory immediately.
Flexibility: A good gifts-in-kind organization will accept all sorts of merchandise from one small box to several truckloads. Upon approval, they will accept underperforming SKUs, discontinued models or colors, seconds, buybacks, returns — virtually anything they think their members can use.

Donating is especially helpful to teachers, who often pay for school supplies out of their own pockets. Joining a gifts in kind organization allows them to stretch their budgets in an era of soaring inflation.

What’s in it for your clients?

Mostly the knowledge that they are helping someone somewhere.

As gifts in kind organizations are nonprofit, any donations to are tax deductible to some extent. If your client’s business is a registered C Corp, that donation may be quite generous. To encourage American businesses to help their communities, IRS regulations allow Regular C Corporations to take an above-cost federal income tax deduction for in-kind donations.

In short, they can help a client eliminate excess inventory, clear precious warehouse space, avoid hassles with liquidators, reduce storage costs, and focus on more profitable products. And do a good thing!

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Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest gifts-in-kind organization in the U.S. Galesburg, Ill.-based www.NAEIR.org has received donations of excess inventory from more than 8,000 U.S. corporations and redistributed more than $3 billion in products to non-profits and schools. Gary can be reached at 800-562-0955 and is happy to consult with you.

Small Business