Hiring guide
Inventory reorder decisions: check stock availability and cash together
By CFO Index · Published
Before approving a stock reorder, ask two questions: will usable stock arrive when customers need it, and can the business meet the payment schedule? A product's margin answers neither. A fractional CFO can connect purchasing decisions to cash, while operations confirms quantities, lead times and the consequences of a stockout.
Do not confuse stock reservations with purchase commitments
Shopify distinguishes available, committed, unavailable and incoming inventory. Its committed quantity includes stock reserved for orders; it does not mean money committed to a supplier. Incoming units are not yet available, and stock held for quality checks may remain unavailable after receipt. Keep those operational states separate from the purchase-order status in finance. Reconcile the records for the relevant product and location before deciding that a reorder is necessary.
Check the gap before the next delivery
Hypothetical stock example: 300 units are on hand, comprising 90 reserved for existing orders, 30 unavailable and 180 available. Another 200 are incoming. If operations expects 220 additional units of demand before that delivery becomes usable, the projected gap is 40 units. Adding incoming stock to today's available quantity would conceal that timing problem. Demand here excludes the already reserved orders; including them again would double-count their requirement. Check stock movements by date, not just a single total.
Put each purchasing option on one decision sheet
Use the following fields for a specific SKU or a genuinely interchangeable product group. The sheet is a proposed management tool, not a purchasing or accounting standard. Have purchasing confirm the supplier terms and operations confirm the stock assumptions. A purchase order's label alone does not establish whether it can be cancelled or changed.
| Field | What to record | Who confirms it |
|---|---|---|
| Stock gap | Usable units, reservations, new demand and expected availability dates | Operations |
| Existing commitments | Outstanding payments, deposits already paid and terms for any change | Purchasing and finance |
| Optional order | Quantity, full price, deposit, balance date and additional cash costs | Purchasing |
| Cash comparison | Lowest projected balance and date, with and without the order | Finance |
| Decision | Approve, revise or defer; decision deadline and authorised owner | Management |
A deposit can be affordable while the complete order is not
Hypothetical October cash example: opening cash is €50,000; €15,000 arrives on 3 October; other payments of €30,000 leave on 10 October; and an existing supplier commitment of €12,000 is paid on 12 October. With no other movements, cash is then €23,000. An optional €20,000 order requires a 40% deposit on 15 October: €8,000. Paying it reduces cash to €15,000, below management's illustrative €20,000 planning minimum. Without it, cash stays at €23,000. The remaining €12,000 due in November must also appear in the forecast. These invented figures exclude additional freight, taxes and fees; add their actual cash dates in a real case.
Compare changes you can actually negotiate
Ask purchasing whether a smaller order, split delivery or different payment schedule is available. Model each offer separately, including any extra price or transport cost. Do not assume a supplier extension is agreed simply because it solves the spreadsheet. If a deposit has already been paid, start from the current bank balance and show only future payments; do not deduct the deposit twice. A refundable amount belongs in expected receipts only with supported terms and timing.
Test slower sales and later availability independently
Slower sales can leave more stock but less incoming cash. A delayed shipment can create a stockout even where the supplier payment date does not move. Run those cases separately before combining them. Review customer commitments and any substitute stock with operations. The model should show the cash effect and the service consequence, not automatically prefer the option with the highest closing bank balance. Financing, if considered, needs its own review of availability, cost and conditions.
Accept the CFO's work when the decision is traceable
Request the stock timeline, dated payment options and one cash forecast containing all existing and proposed purchases. Ask an internal owner to change a delivery date and explain which shortage or payment changes. Record the chosen option and its approval before placing the order. At the next review, compare actual availability, payments and sales with the original assumptions. A useful reorder process keeps operational facts and commercial commitments connected; it does not promise a universal stock level or cash buffer.