The cash conversion cycle is the number of days it takes for money paid into inventory to come back into the till through sales. In e-commerce the real limit on growth is usually not demand but this cycle.
Marketplaces typically pay out 15–45 days later, while suppliers are paid up front or on 30-day terms. The gap in between creates a cash requirement that grows as you grow. That is how a profitable store can run out of cash while expanding fast. Extending supplier terms is the most effective way to shorten the cycle.
Cash cycle = Inventory days + Receivable days − Supplier payment term days
50 days of inventory, 30 days to marketplace payout, 30-day supplier terms → 50 + 30 − 30 = 50 days of cash gap.
Marketplaces typically pay out 15–45 days later, while suppliers are paid up front or on 30-day terms. The gap in between creates a cash requirement that grows as you grow. That is how a profitable store can run out of cash while expanding fast. Extending supplier terms is the most effective way to shorten the cycle.
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