Turn stock faster to unlock cash
Full shelves and a thin bank balance usually mean stock is hanging around too long. The same idea applies to service businesses: if you take a long time to bill or collect, you are carrying “virtual stock” in the form of work in progress (WIP). Converting both physical stock and WIP to cash sooner strengthens day-to-day cashflow.
How to calculate stock turn (including WIP)
Stock turn shows how many times you sell (or complete) what you carry in a year. A simple way to work it out is:
Stock turn = Cost of sales ÷ Average inventory (or average WIP)
You will find “cost of sales” in your annual financial statements. “Average inventory” is usually the average of opening and closing stock. If you are a service business, treat WIP the same way. If this is new to you, we can step you through it and supply the numbers. Expected stock turn varies by industry, so avoid comparing your result with unlike businesses.
Your goal: convert stock to cash faster
Use the prompts below to spot practical improvements.
- Stocking strategy: Have you set safety stock, target levels and reorder points for each category?
- Visibility: What system tells you, in real time, what is on hand, what is on order and what is reserved?
- Slow movers: What rules do you use to identify and clear slow or obsolete items?
- Shrinkage: How much are theft, damage and write-offs costing, and what controls reduce this?
- Ordering discipline: Do you have an approvals process so purchasing does not run ahead of demand?
- For services: How quickly are jobs quoted, completed, billed and collected? Can you progress-invoice to reduce WIP?
Quick wins we often recommend
- Shorten supplier lead times or raise reorder frequency to carry less per order.
- Introduce ABC analysis to focus on high-value and high-velocity lines.
- Run aged-stock and aged-WIP reviews weekly; set “action by” dates.
- Offer bundles, promotions or write-down policies for stock over a set age.
- For WIP, move to milestone billing, take deposits, and automate reminders.
Next step
If you suspect stock or WIP is tying up cash, book a Cashflow & Profit Improvement Meeting. We will calculate your current stock turn, model the impact of small changes, and give you a simple action plan to release cash without hurting sales.
At your session we will also use our calculator to show exactly how much cash you can unlock by improving stock turn and tightening your WIP cycle. Then we will help you implement the process, system and policy changes to make it stick.
