PRICING AND INVENTORY
How to Plan Cash Flow for a Clothing Resale Business
A resale business pays for stock before it sells anything, and sales money often arrives in small amounts, sometimes days after the sale. A business can be profitable on paper and still run short of cash in the week a bale payment is due.
A cash flow forecast shows that gap in advance. It sits alongside your monthly profit calculation, which answers a different question.
FOUR DIFFERENT NUMBERS
Keep them apart.
Revenue
The value of what you sold in a period, whether or not the money has arrived yet.
Cash flow
Money actually arriving and leaving, in the week it moves. A marketplace payout that arrives a week after the sale counts in the week it arrives.
Inventory value
What your unsold stock cost you. That cash is already spent, and the stock may sell for more, less or not at all.
Profit
Revenue minus the cost of the items sold and running costs. Unsold stock is not a cost of the period until it sells or is written off.
BUILD A FORECAST
Week by week, for eight to twelve weeks.
Start with cash today
The cash and bank balance the business can actually use.
Add expected receipts
Sales money in the week you expect it to arrive, after fees and any payout delay. Base it on recent weeks, not hopes.
Subtract stock payments
The full landed cost of each order in the week you pay it; see calculating landed cost.
Subtract running costs
Rent, transport, packaging, wages and other regular payments, in the weeks they are due.
Find the lowest week
The lowest closing balance is the number that matters. It must stay above a reserve you are comfortable with.
HYPOTHETICAL EXAMPLE
Eight weeks after one bale order.
Hypothetical figures in units of your own currency, not a forecast. Opening cash is 10,000. In week 1 the business pays 8,000 for one order (landed cost and preparation). Running costs are 400 a week. Sales receipts, after fees and payout delays, are 0, 1,200, 1,800, 2,000, 2,000, 1,800, 1,500 and 1,200 in weeks 1 to 8.
If a second 8,000 order were paid in week 5, that week would close at −1,000. Paying it in week 8 leaves 2,300.
Hypothetical example only.
| Week | Closing cash |
|---|---|
| Week 1 | 1,600 |
| Week 2 | 2,400 |
| Week 3 | 3,800 |
| Week 4 | 5,400 |
| Week 5 | 7,000 |
| Week 6 | 8,400 |
| Week 7 | 9,500 |
| Week 8 | 10,300 |
CASH IS NOT PROFIT
The same eight weeks, reconciled.
In the same hypothetical example, suppose the items sold account for 70% of the order’s cost, and every receipt has arrived by week 8.
Cash rose by only 300, yet the period made a profit of 2,700. The difference is the 2,400 of unsold stock: cash that has turned into inventory. Profit (2,700) minus the increase in inventory (2,400) equals the change in cash (300).
Hypothetical example only.
| Line | Units |
|---|---|
| Sales receipts (after fees) | 11,500 |
| Cost of items sold (70% of 8,000) | 5,600 |
| Running costs (8 × 400) | 3,200 |
| Profit | 2,700 |
| Unsold stock at cost | 2,400 |
| Change in cash | +300 |
PROTECT YOUR CASH
Practical habits.
Small habits keep the lowest week above zero.
- Keep a reserve that covers several weeks of running costs, and do not count it as money for stock.
- Time new orders for when the forecast can absorb them; see planning repeat orders.
- Know when each sales channel pays out, and forecast receipts on that date.
- Move slow stock before it ties up more cash; see managing unsold inventory.
- Update the forecast weekly with what actually happened.
NEXT STEP
Planning cash around an order?
Ask for a quotation with your categories, quantity and delivery location, so the stock payment in your forecast uses a real figure.
Hypothetical figures for illustration only, not a forecast or a promise of returns. Not financial, accounting or tax advice; ask a qualified adviser how to account for stock in your business.