How to cut a reseller's financing cost through the cash conversion cycle, receivables ageing and stock turnover, with a 12 million TRY turnover example.
In IT products, the reseller's profit is often lost not in the sales margin but in stock and receivables management. A reseller working at a 12 percent gross margin can see financing costs eat the whole margin if goods sit on the shelf for 90 days. Here are five practical rules that protect cash flow.
1. Calculate your cash conversion cycle
Cash conversion cycle = days in stock + collection period - supplier payment term. For example, if goods stay in stock for 45 days on average, collection from customers takes 60 days and the distributor term is 30 days, the cycle is 75 days. For a reseller with a yearly turnover of 12 million TRY, that means daily revenue of about 32,900 TRY and 2.47 million TRY of working capital.
2. Keep stock "by project"
Instead of stocking high-value products such as servers, firewalls and upper-segment laptops, work to order. Live distributor stock and 24-hour dispatch let the reseller say, "I do not have it in stock, but I will have it tomorrow." For fast-moving items (wireless sets, monitors, toner) a small safety stock is enough.
3. Review receivables ageing weekly
List receivables older than 30, 60 and 90 days. The likelihood of collecting falls quickly beyond 60 days. With large customers write terms into the contract from the start, such as a partial advance, bank transfer instead of cheque, and a term that starts at delivery or installation date.
4. Choose between term and discount
Paying cash for a 2 - 3 percent discount instead of taking 60-day terms from the distributor makes no sense if your monthly financing cost is 3.5 percent, because two months of term is worth about 7 percent. Know your own financing cost and make term and discount decisions accordingly.
5. Raise stock turnover
Stock turnover = annual cost of sales / average stock. Review product groups with turnover below 8. Cutting 15 days from stock frees about 493,000 TRY of cash at a reseller with 12 million TRY turnover. At a monthly financing cost of 3.5 percent that is a saving of about 207,000 TRY a year.
Conclusion
Raising the margin is hard; shortening the cash cycle is in your own hands. The Bayit margin calculator helps you find the right sale price by building term and financing cost into the price.
A small action plan
Set three tasks for the next 30 days: split your stock list into A/B/C by turnover, draw up a collection calendar for receivables older than 60 days and review your distributor terms. Tracking these three indicators in a monthly meeting lets you grow without a cash squeeze.