Monday, January 21, 2019

Inventory, Cash Flow, and Profit

Inventory sitting on your factory floor is doing you no favors. It can go obsolete, get damaged, and tie up cash. So why have it? Buying more product gets you more discounts, which increases profitability.

Everyone wants to be more profitable, right? There's even a shortcut to being more profitable, and it doesn't require any real work - dump all your cash into inventory. The fastest and easiest way to make a business look more profitable on paper is to decrease costs. The fastest way to do that is to pay less per unit for materials. The fastest way to pay less per unit is to buy in massive quantities. So - the quickest way to look good on paper is to dump all of your cash into inventory that will sit on your floor.


You could keep a careful eye on inventory, turning your cash into product in smaller amounts that keep your cash more readily available. You won't see big discounts in product and your profitability-on-paper might not look as nice. But you'll keep the doors of your business open longer.

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