Inventory financing and cash-conversion-cycle reviews

We chart a unit of stock from purchase order to cash received: supplier terms, lead time, time in the warehouse, time to sell and time to collect. Each step is valued in days and in funding cost, by brand, category and warehouse.

The funding paper that follows sets out how much stock the group should carry, how to finance it and what each option costs.

• A cash-conversion-cycle analysis by brand, category and warehouse, in days and in value.
• An ageing and cover report that ranks stock by cash tied up and expected time to sell.
• A funding cost allocation showing the financing charge carried by each category.
• A financing options paper comparing facilities, supplier terms and shareholder funding.
• A buying policy with cover targets and approval levels, ready for the board.

• The cash conversion cycle is measured in days for every category, and the board sees where it runs longest.
• Capital tied up in stock older than the agreed threshold is on the page and tracked.
• Buyers see the financing cost of the stock they order, set against its gross margin.
• Stock purchases are forecast against sales.
• Peak-season funding is arranged ahead of the buying commitments, and the board checks the order of the two.

Buying teams are rewarded for availability, so stock builds where demand is uncertain. Slow lines hide behind fast ones in the average. The capital sits on shelves, ages and is discounted, while the group borrows at a cost it does not allocate back to the buyer. Financing choices are made facility by facility, without looking at what the stock itself would support.

• Days of stock cover are reported as a single group number.
• Aged and slow-moving stock is written down late and in one amount.
• Funding for the peak season is arranged after the buying commitments are made.
• Buyers do not see the financing cost of the stock they order.
• A lender has asked for a borrowing base or a stock report the group cannot produce.

Chairmen and chief executives of retail, e-commerce, distribution and grocery groups whose largest balance-sheet asset is stock, and who fund it from facilities, shareholder loans or supplier credit.

Qasim Abbas has answered for treasury above USD 50M at group level and set the capital logic behind a last-mile fleet, and he treats stock as capital that someone has to fund. We price what each day of inventory costs your group.

We read your stock, warehouse and accounting systems. The logistics cash cycle tool turns inventory days, receivable days and supplier days into a cash conversion cycle. See how fees work.

Will you recommend writing down old stock?

We recommend a path for every aged line, with its cash value and expected sale path.

Can this help us raise stock-backed finance?

Yes. The review produces the reporting a lender asks for and a financing options paper that sets stock-backed finance beside the alternatives.

How is this different from working-capital management?

Working capital covers stock, receivables and payables together. This review goes deeper into stock and the way it is financed.

Give us the current stock listing. We show how much cash it holds beyond the cover the business needs and the first funding question for your board, in a private briefing.