Table of contents5 sections
Sales are growing, the warehouse is starting to empty, and the supplier expects confirmation of the next order. The problem is that part of the sales money is still tied up in receivables, earlier deliveries have not yet been paid in full, and salaries, taxes and transport costs also fall due in the next few days.
The company has to make a decision: how much stock to order, and whether it has enough cash to finance the next sales cycle.
We know what it is like when the sales result looks good, but the account balance gives no certainty whether a large order can safely be approved. The value of issued invoices does not yet mean available money, and the stock level does not show all the payables that will appear in the coming weeks.
That is why inventory replenishment and cash flow planning should combine the sales forecast, client payment terms, supplier terms, current stock and the company’s other costs.
The goal is not only to answer the question of how much stock to buy. You also need to know:
- when it has to be paid for,
- when the money from sales will actually return to the account,
- how much cash will remain after the other payables are settled,
- whether the next replenishment will create a liquidity gap.
Sales are growing, the warehouse is starting to empty, and the supplier expects confirmation of the next order. The problem is that part of the sales money is still tied up in receivables, earlier deliveries have not yet been paid in full, and salaries, taxes and transport costs also fall due in the next few days.
Why can growing sales increase the need for cash?
In trading, revenue growth often requires increasing inventory beforehand. The company has to buy more goods before it receives money from the end customer.
The faster sales grow, the more money can be frozen at the same time in:
- goods sitting in the warehouse,
- orders in transit,
- receivables from customers,
- advance payments made to suppliers,
- logistics costs,
- taxes related to purchases and sales.
A business can therefore be profitable and still not have enough funds for the next order.
The supplier expects payment earlier than the client pays
An example cycle may look like this:
- 1. The company orders goods.
- 2. The supplier requires a 30% advance payment.
- 3. The remainder is payable before shipment or after 14 days.
- 4. The goods arrive in the warehouse.
- 5. The customer buys them with a payment term of 30 or 60 days.
- 6. The actual transfer arrives later still.
In such a model the company finances the inventory and the receivable from its own capital for many weeks.
If the order is worth 250,000 PLN and customers pay after two months, even profitable sales may require a substantial cash buffer.
Sales are seasonal, but costs come earlier
Trading companies often have to stock up before a period of higher demand.
This may mean having to finance:
- a larger purchase of goods,
- additional warehouse space,
- transport,
- seasonal staff,
- a sales campaign,
- packaging,
- handling of returns.
Revenue appears only later. If the company assesses its purchasing capacity solely on the basis of the current balance, it may fail to notice that large expenses will overlap in the coming weeks.
Goods do not sell at the assumed pace
A replenishment forecast may assume fast turnover. In practice, part of the products stays in the warehouse longer.
Cash gets frozen in:
- seasonal products,
- excess stock,
- slow-moving variants,
- goods bought in too large a batch,
- products that need a price reduction,
- stock with limited return options.
A company may have a warehouse full of valuable goods and still lack the funds to pay for the next delivery.
The forecast relies on invoice due dates, not on how clients actually behave
A customer may have a payment term of 30 days but regularly make the transfer after 42 days.
If the company plans replenishment on the basis of the formal due date, it may assume that the money will be available earlier than it actually arrives.
With several large customers, a difference of even a few days can decide whether the business pays its supplier safely.
How to plan the cash needed for the next replenishment?
An effective forecast should cover the whole cycle: from ordering the goods, through selling them, to the actual arrival of the money.
1. Calculate the real cost of the purchase
The value of the goods on the supplier’s invoice is not always the full cost of replenishment.
You also need to include:
- transport,
- customs duty and import charges,
- insurance,
- storage,
- packing and assembly,
- packaging,
- quality control,
- commissions,
- financing costs,
- potential losses and returns.
Only the sum of all these expenses shows how much cash will be needed to receive the goods and prepare them for sale.
2. Lay out the payment schedule to suppliers
For each order it is worth specifying:
- the order value,
- the required advance payment,
- the due date of the remaining payment,
- the expected delivery date,
- the moment sales begin,
- the planned inventory turnover time.
Example:
- order value: 180,000 PLN,
- advance payment when ordering: 54,000 PLN,
- payment before shipment: 90,000 PLN,
- the remaining 36,000 PLN: 14 days after delivery.
The company does not need the whole 180,000 PLN on one day, but it must know when each instalment falls due and what other costs will appear in the meantime.
3. Forecast real inflows from sales
The forecast should take into account not only planned sales, but also the way customers pay.
It is worth separating:
- cash and card sales,
- prepayments,
- payments with a short term,
- trade credit,
- overdue receivables,
- returns and corrections.
For B2B clients you also need to analyse their history.
If the formal term is 30 days but the client usually pays after 40 days, the forecast inflow should be shifted.
4. Include the company’s other costs
You cannot allocate the whole account balance to replenishment.
In the same period the company may have to pay:
- salaries,
- taxes and contributions,
- leasing instalments,
- rent,
- transport invoices,
- payables to earlier suppliers,
- marketing costs,
- warehouse expenses,
- refunds to customers.
That is why, before approving a purchase, you should calculate:
Cash available for replenishment = account balance + real inflows before the payment due date – all other payables – safety buffer
5. Prepare several scenarios
A single forecast may be too optimistic. It is worth preparing at least three variants.
Base scenario — sales as planned, clients pay in line with their typical behaviour, costs do not exceed the assumption.
Cautious scenario — sales are lower, some clients pay later, transport or purchase cost more.
Critical scenario — a large customer delays payment, part of the goods sell more slowly, an additional expense appears.
Thanks to this the company knows what order size is safe even if events turn out less favourably.
How did we solve cash demand forecasting at Administy?
Running agencies, we did not buy warehouse stock, but we operated on a very similar financial mechanism.
Before receiving full payment from the client, we had to finance:
- the team’s working time,
- contractor invoices,
- subcontractor services,
- licences,
- tools,
- the costs needed to complete the project.
The client paid only after a stage was completed, the work was accepted, or according to a deferred invoice term.
In practice this meant we first incurred the cost and only later recovered the cash.
The problem appeared when the formal schedule looked safe, but client payments arrived later than we assumed. At the same time, salaries and subcontractor invoices had fixed due dates.
That is why at Administy we combined:
- the current balance and transactions,
- issued sales invoices,
- payments actually received,
- the payment history of business partners,
- planned costs,
- cost invoices,
- recurring payables,
- expenses needed to complete projects.
The system analyses future costs and shows how much has already been paid, which invoices the company is still waiting for and which expenses fall outside the original plan. Administy also lets you set the financial result against actual cash flow, because the value of issued invoices alone does not show the cash available.
The same mechanism can be applied in trading.
For the next replenishment you need to set side by side:
- the planned order value,
- the supplier’s advance payments and payment terms,
- transport costs,
- the company’s other payables,
- expected inflows from customers,
- their real delays,
- the minimum safety buffer.
Administy can support analysis of historical cost categories, forecasting of further expenses and an assessment of how much money is needed until the end of the month, even before all the cost invoices have reached the system.
Thanks to this the owner does not have to base decisions solely on the current balance.
They can see that:
- today the company has 320,000 PLN in the account,
- before the payment for the goods, 140,000 PLN will probably come in,
- at the same time 210,000 PLN of other costs has to be covered,
- the minimum buffer is 80,000 PLN,
- the safe amount that can be allocated to the purchase is much lower than the current balance.
Such a forecast lets you, earlier:
- reduce the order size,
- split the delivery into batches,
- negotiate a longer term,
- increase advance payments from customers,
- speed up the recovery of receivables,
- secure working capital financing.
The most important change is moving from the question:
“Do we have the funds to buy today?”
to the question:
“After paying for the goods and all other payables, will we have enough cash until the next payments come in?”
Replenishment has to be planned together with the whole cash flow
A purchasing decision should not result solely from the sales forecast or the current stock level.
Reliable inventory replenishment and cash flow planning requires combining the delivery schedule, payment terms, client behaviour, operating costs and a minimum financial buffer.
Thanks to this the company can secure the availability of goods without the risk that the next order uses up the funds needed for salaries, taxes or payments to earlier suppliers.
Check how much cash you can safely allocate to goods
Administy helps you bring together expected inflows, planned costs, pending invoices and future payables in a single cash flow view.
