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.

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.
Was this article helpful?
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.