E-commerce · Economics
Inventory cash conversion cycle
Published · Reviewed by The Diligence Standard Team · Updated
Supplier deposits, production, transit, storage and marketplace payout timing determine the cash required for growth.
Records to reconcile
- Purchase and payment dates
- Transit and receiving dates
- Sell-through and payout dates
Warning signal
Growth requires larger cash commitments before earlier inventory converts to cash.
Transaction impact
Working capital can exceed the buyer’s financing plan.
Response
Model the full cycle and negotiate an appropriate working-capital mechanism.