This week’s 1 tip discusses a major part of your cash flow.
Here we go:
Increase your cash flow by selling through your inventory between 1 and 3 months.
Much of the cash of a business is tied to inventory. Make sure you keep track of how long it takes you to turn over your inventory. Meaning, how many days does it take you to sell your inventory? Or another way to think is how often you purchase your inventory.
The key to a healthy cash flow is not only to have a good profit margin but also to sell your inventory within one to three months. As every business is different, it is impossible to give an exact time for how long it should take to turn over your inventory. To find out what will be best for your business you need to forecast your cash flow and see how long you can wait until you sell it out. Read this blog to get a deeper understanding to inventory turnover.
Consider lowering your price and moving more pieces each day if you need the cash back sooner.
See this image below as an example of how lowering a little in profits can double the speed to sell it out.
You can use this excel sheet to calculate for yourself. Download it here for free. Inventory Turnover.xlsx
Sometimes, it makes sense to lower your profit margin in order to sell your inventory more quickly.