Inventory: What a Difference Two Months Make
In this example, the company on the left keeps one month’s worth of inventory, and the one on the right keeps three months. That’s the only difference between both of these cash scenarios. The result of the three-month inventory assumption in this case is almost a million dollars of deficit by the end of the year.
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| Source: Business Plan Pro, AMT Sample Plan, Cash Pilot View. The cash pilot allows instant adjustment of critical cash variables including sales on credit as a percent of sales, collection days, inventory on hand, and payment days. This view shows the scenario on the left with a month of inventory on average, and the one on the right with three months of inventory on average. |
[...] The difference in cash with different assumptions can be startling. You can look ahead to see that in a graphic called What a Difference Two Months Makes. [...]