A product sells well and leaves a healthy margin. Ordering more looks like the obvious next step. A larger order may even bring the cost per unit down.
The question I now ask before committing is how the business will fund the time between paying for that stock and receiving the money from selling it.
The payments before the payout
For imported marketplace stock, money can leave at several points: a supplier deposit, the balance before shipment, freight and preparation. The stock then needs to arrive, become available for sale and sell. Marketplace payouts follow their own schedule.
The margin on each sale matters. So does the length of that wait. While the first order is still returning cash, demand may require a second, larger order.
That overlap is easy to miss when looking only at units sold. The business can be earning a profit while needing additional money to keep the product available.
How I changed reorders
I began modelling reorders on cash as well as units. If I placed an order, when would each payment fall due? When could I expect the cash back? What else would the business need to pay in between?
Some reorders were reduced. Some were split into smaller, more frequent shipments. Those shipments cost more per unit, but left the business in a better cash position. In a few cases, improving supplier payment terms helped more than negotiating a lower price.
I was accepting a cost to keep more money available. The decision needed to account for both sides: the margin given up and the room gained to keep operating.
What the slower pace made possible
Growth on those products slowed slightly. The business became less fragile. When a shipment was delayed by several weeks, it was an inconvenience rather than a crisis.
That does not mean every growing product should be slowed down. Missing sales has a cost too. The useful question is how much growth the business can fund on the available terms, with enough room for a delay or weaker demand.
It is also a question worth keeping visible when working with brands. More orders create a need for stock and funding. Sales, replenishment and cash timing need to be reviewed together so the owner can decide what to commit next.
I am still working out how much cash a product should be allowed to absorb. I look at the other uses for that money, the cost of funding and how much confidence I have in demand. A product’s margin gives me part of the answer. The payment schedule gives me another.