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Business Finances

The third cause of poor cashflow – Your stock turn

Posted by: Ewen Fletcher on

Carrying stock for too long means full shelves but an empty bank account. Similarly, if you’re a service provider and are taking forever to bill for your services, consider that work in progress as a form of virtual stock.

You can calculate your ‘stock turn’ by taking your cost of sales from your annual financial statements and dividing it by your average inventory. Expected stock turn rates vary from industry to industry so it’s important you don’t compare your stock turn to other types of businesses.

The key is to convert stock to cash faster. Ask yourself these questions, just for starters:

We can’t do justice to the detail in this short article, so if you think your stock levels might be stifling cashflow in your business, make time to see us. We’ll show you how much cash you can unlock in your business by setting some SMART goals and putting in place a simple action plan.

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