Retail growth is easier when inventory plans match cash timing.
Retail expansion often stresses cash flow not because sales are not happening, but because cash gets locked up in inventory and operations long before retail payments arrive. The fix is planning inventory like a cash manager: forecast conservatively, budget buys (OTB), manage lead times and terms, and use financing only when it protects margin and timing.¹ ² ³
· The cash conversion cycle measures how long it takes to turn inventory and other inputs into cash, and it can highlight where cash gets stuck.² ¹
· Open-to-buy (OTB) is a retail buying budget method that helps align inventory purchasing with planned sales and inventory targets.³
· Profit can look strong while cash is tight when inventory is purchased far ahead of retail payment timing (common with net terms).¹ ²
· Inventory timing risks increase with long lead times, MOQs, and prepaid deposits, because cash is committed earlier and longer.¹ ²
· Purchase order financing can help fund inventory for confirmed orders, but it is short-term and must be weighed against margin impact.⁴ ⁵
Retail growth is exciting. It is also one of the fastest ways to accidentally put a profitable brand into a cash crisis.¹ ²
That sounds dramatic, but it happens all the time.
Here is the issue: retail growth usually requires you to spend money long before you get paid. You may have to place a production order,buy packaging, reserve freight, pay a co-packer, and commit to minimum order quantities. Meanwhile, your retail customer might pay in 30, 60, or even 90days.¹ ²
So even if sales are strong, your cash is tied up in inventory and operational expenses.¹ ²
This is why many CPG brands feel like they are “winning” in retail and still cannot breathe financially.
Retail does not break brands because of demand. It breaks brands because of timing.¹ ²
If you want to scale without stress, your retail planning has to start with cash flow, not sales goals.¹ ²
Inventory is not just product sitting in a warehouse.Inventory is cash that has been turned into boxes.
That is why inventory planning is really cash planning.
Many brands plan inventory like this:
“We sold 500 last month, so let’s order 1,500.”
That is not a plan. That is a guess with a purchase order attached.
A cash-first inventory plan asks better questions:
· What is our realistic sell-through rate?
· How much inventory do we already have?
· How long will it take to produce and deliver the next order?
· How much cash do we need to keep operating while inventory sits?
This is where a disciplined buying approach matters. You do not need to be fancy. You do not need to build a spreadsheet the size of a novel.
You simply need to decide what your business can afford to invest in inventory at any given time, without draining your ability to operate.³
That means your inventory plan must include:
· production lead times
· delivery lead times
· storage and freight costs
· payment terms
· how quickly your customers actually pay¹ ²
When brands ignore these details, they end up with two common problems:
· too much inventory and not enough cash
· not enough inventory and missed retail momentum
Both outcomes hurt the business.
Forecasting is one of those words that scares people, mostly because it sounds like something you need a finance department to do.
You do not.
Forecasting simply means making your best estimate of what you will sell, based on reality instead of hope.
The brands that get burned in retail usually do one of two things:
They under-forecast because they want to “play it safe,” and then they cannot keep product on the shelf.
Or they over-forecast because they assume growth will happen automatically, and then they are stuck holding inventory they cannot move.
The best approach is to build your forecast using three layers:
1) Historical sales (your data)
Even if you are early-stage, you still have patterns. Your own numbers matter more than industry averages.
2) Retail realities (their system)
Retail does not behave like direct-to-consumer. Promotions,resets, seasonal shifts, shelf placement, and store-level execution all impact sales.
3) Conservative assumptions (your safety net)
Your forecast should include a buffer for things going wrong, because in retail, things always go wrong.
Your goal is not to predict the future perfectly. Your goal is to reduce surprises.
And when surprises happen, you want them to be manageable.
That is the difference between “growing pains” and “cash flow collapse.”¹²
Let’s simplify this.
Most cash flow issues in retail planning come down to three mistakes.
Revenue is what you earn.
Cash is what you can use.
You can ship a huge order, celebrate the purchase order, and still be broke because the money is not in your bank account yet.¹ ²
Retail brands get trapped when they assume that selling more automatically means they have more cash.
In retail, it usually means the opposite, at least temporarily.¹ ²
Fear-based ordering usually sounds like this:
“We cannot run out.”
So the brand over-orders. They lock up cash. They fill warehouses. They start paying storage fees. Then they need more cash to operate. Then they start borrowing to survive.
This is how brands become “successful” and stressed at the same time.
Being out of stock is a problem.
But being overstocked is often worse, because it drains cash quietly and continuously.³
This is the silent killer.
A brand may plan a product run and assume the timeline is straightforward.
But lead times stack up fast:
· ingredient lead times
· packaging lead times
· production scheduling delays
· freight delays
· warehouse receiving delays
· retail receiving delays
· payment processing delays¹²
If you have to pay for production today, but you get paid 75 days after delivery, you are not planning inventory. You are financing the supply chain.¹ ²
If your retail plan does not include timing, it is not a plan.
It is a risk.
Let’s be honest.
Most CPG brands do not have unlimited cash reserves sitting around waiting for retail expansion.
Even PE-funded brands have constraints, because investors still expect discipline.
So what do you do when you have demand, but cash is tight?
You have three realistic paths.
1) Improve terms before you look for financing
Before you borrow money, look at your timing.
Can you negotiate better supplier terms?
Can you extend payment windows?
Can you restructure deposits?
Can you split production payments?
Even small improvements can change your cash position dramatically.¹ ²
2) Use financing tools strategically, not emotionally
Some brands use financing as a panic button.
That is expensive.
If you use financing, use it as a planned bridge, not a desperate reaction.
Common options include:
· Purchase Order (PO) financing⁴ ⁵
· invoice factoring⁶
· short-term working capital loans⁴ ⁵
These tools can help, but they are not free.
The key question is not “Can we get financing?”
The real question is:
Does this financing protect our growth without putting us into a long-term cash trap?⁴ ⁵
If the cost of financing wipes out your margin, it is not solving the problem. It is just delaying it.⁴ ⁵
3) Control growth speed intentionally
Sometimes the smartest move is to grow slower.
That is not a weakness. That is leadership.
Scaling retail too fast can turn a strong brand into a stressed brand.
The goal is not to grow at the maximum speed possible.
The goal is to grow at a speed your cash flow can support.
That is how you stay in the game long enough to win.
If you want a simple way to think about retail planning,here it is:
Your retail plan should answer these five questions before you scale.
1) How much inventory can we afford to carry?
Not how much we want.
How much we can afford.³
2) How long will cash be tied up before we get paid?
If you do not know the timeline from paying suppliers to collecting payment, you are operating blind.¹ ²
3) What happens if we miss the forecast by 20%?
Because you will.
Forecasting is not perfect. Your plan needs flexibility.
4) What is our “cash floor”?
What is the minimum amount of cash you must keep available to operate safely?
This is your survival line. Do not cross it.
5) What is our backup plan if retail accelerates faster than expected?
This is a good problem, but it is still a problem.
If demand spikes, can you fund production quickly without draining cash?
If not, you need a strategy before the opportunity shows up.
The simplest retail planning rule
If you remember nothing else, remember this:
Retail planning is not about how much you can sell.
It is about how long your cash stays trapped.¹ ²
When you plan for that, retail growth becomes manageable,scalable, and far less stressful.
Want help building a retail plan that protects cash flow?
If you are preparing for retail expansion or struggling to keep up with demand, we can help you build a retail plan that balances growth, inventory, and cash flow.
Reach out to CPGBrokers and Associates to talk through your retail goals and build a plan that supports growth without draining your working capital.
For strategy or implementation support, contact us below.
1. Investopedia — “Cash Conversion Cycle (CCC): Definition”
2. J.P. Morgan — “Understanding & Optimizing Your Cash Conversion Cycle (CCC)”
3. Fit Small Business — “Open-to-Buy (OTB) Planning Guide”
4. Forbes Advisor — “What Is Purchase Order Financing? An Expert Guide”
5. NerdWallet — “Purchase Order Financing: What It Is and How to Get It”
6. HubSpot — “Purchase Order Financing 101: Pros, Cons, and How It Works”
