💸 What to Do When Cash Isn’t Rotating in Wholesale Distribution

nadim mujawar
Jul 7
3 min read

In the fast-paced world of wholesale distribution, cash rotation — the smooth flow of cash from sales back into inventory and operations — is the heartbeat of sustainability. But what happens when that flow gets stuck?

Many distributors, especially in sectors like pharmaceuticals, FMCG, and consumer durables, find themselves asset-rich but cash-poor. If you're noticing cash stagnation, delayed payments, or rising credit cycles, it’s time to pause and re-evaluate.

Here’s what to do when your cash isn’t rotating in wholesale distribution:

🔍 1. Identify the Bottlenecks

Before jumping to solutions, identify where your cash is stuck:

Receivables: Are your customers taking too long to pay?
Inventory: Are you holding dead stock or overstocking slow-moving items?
Payables: Are you paying suppliers faster than you collect from customers?
Margins: Are you selling on wafer-thin margins without volume benefit?

🛠 Action: Create a working capital dashboard to track days sales outstanding (DSO), inventory turnover ratio, and days payable outstanding (DPO).

📉 2. Tighten Credit Control

Credit is often the biggest reason for poor cash flow.

Revisit credit terms — reduce the credit period gradually.
Implement credit limits per customer.
Use software or Excel trackers to send timely payment reminders.
Penalize late payments (gently but firmly).

💡 Tip: Classify customers into credit-worthy vs. cash-only segments.

📦 3. De-Risk Your Inventory

Old, expired, or dead stock is locked-up cash.

Conduct monthly aging analysis of inventory.
Push out non-moving stock via schemes or combo offers.
Avoid emotional buying from suppliers — focus on data-driven replenishment.

📊 KPI to watch: Inventory Turnover Ratio (target ≥ 8 for most retail sectors)

🔄 4. Negotiate with Suppliers

If you’re rotating slowly but still paying suppliers upfront or quickly, you’re burning cash.

Ask for better payment terms (e.g., 30 or 45 days credit).
Explore bulk discounts only if they align with your rotation cycle.
Build partnerships with distributors or super-stockists with better terms.

🤝 Win-win payment plans can save both relationships and cash.

📈 5. Increase High-Margin or Fast-Moving Product Focus

Not all products are equal in cash generation.

Push SKUs that rotate faster and have better margins.
Reduce emphasis on large packs or high-value slow movers unless you have assured buyers.
Offer value-added services to justify a better price.

💡 Sometimes better pricing, not volume, is the solution.

🧾 6. Automate & Track Cash Flows Daily

Use accounting software BI tools dashboards to:

Track overdue payments.
Get real-time inventory visibility.
Forecast future cash shortages.

🧠 “What gets measured, gets managed.”

🛡 7. Build a Cash Reserve Strategy

If your business has previously seen healthy cycles, build reserves:

Set aside 5–10% of monthly sales into a reserve account.
Avoid using all profits for expansion until cash cycles improve.

📉 “Growth without cash discipline is a recipe for debt.”

🚨 Bonus: Watch for Shrinkage, Leakage & Fraud

Sometimes the issue isn’t just operational — it’s internal control.

Audit discounts, returns, and schemes regularly.
Watch for theft, billing manipulation, or wastage.

🛠 Solution: Surprise audits, CCTV review, and role-based access in billing systems.

🔚 Final Thoughts

In wholesale distribution, profit on paper doesn't matter unless cash is actually coming in. By tightening credit, improving inventory efficiency, and renegotiating supplier terms, you can regain control of your cash rotation.

Don't just aim to sell more. Aim to collect faster and rotate smarter.