Money through a stock and credit business.
WHY IT IS THE CENTRAL DIFFICULTY
You pay suppliers, hold stock, and extend credit, all before collection.
WHAT THAT PRODUCES
Cash committed at three points simultaneously.
WHAT TO CALCULATE
The cash cycle: days from paying a supplier to collecting from a customer.
HOW
Days of stock held, plus days customers take to pay, less days you take to pay suppliers.
WHY IT MATTERS
It tells you how much cash growth consumes.
WHAT A LONG CYCLE MEANS
Every additional sale requires cash before it produces any.
WHAT TO SHORTEN IT
Faster stock turnover Shorter customer terms Longer supplier terms
WHY EACH MATTERS
They all release cash directly.
WHAT TO NEGOTIATE WITH SUPPLIERS
Terms, once you have a payment record.
WHY IT MATTERS MOST HERE
Supplier credit is the cheapest funding a distributor has.
WHAT TO AVOID
Funding growth entirely from stretched supplier terms.
WHY
One customer failing to pay breaks the chain.
WHAT TO MONITOR
Stock value Debtor balances and ageing Creditor balances Cash position
WHAT TO FORECAST
Cash, weekly.
WHY WEEKLY
Distribution cash moves fast and monthly review is too late.
WHAT TO WATCH
Stock rising faster than sales Debtors ageing Both together
WHAT THAT COMBINATION MEANS
Cash is being consumed and the business is in difficulty.
