Journal · 2025-11-22
When Inventory Builds Are a Cash Problem, Not a Sales Story
Separating intentional seasonal stock from cash locked in slow-moving SKUs during an audit review.
Inventory builds tell two stories. One is intentional: stocking ahead of a known season or a large confirmed order. The other is cash trapped in SKUs that stopped moving while the warehouse still looks full.
During cash-flow field review, we ask for inventory aged by SKU and by last movement date, not only for a total valuation. A rising inventory balance with falling turns is a liquidity issue even when the balance sheet still looks asset-rich.
Seasonal builds should have an exit date. If the build plan has no corresponding sales window in the forecast, treat the spend as discretionary until sales confirms the window. Finance and operations need the same calendar.
Slow-moving stock rarely becomes cash at book value. A cash-flow audit memo should state a realistic recovery range and the decision required — discount, return to supplier, or scrap — with an owner. Leaving the item unmarked keeps phantom liquidity in the forecast.
CFOs who only watch inventory as a percentage of sales miss the cash timing. The purchase hits the bank weeks before the sale; the audit’s job is to make that lag visible before the runway chart turns red.