Where Your Cash Is Hiding (5 Supply Chain Mistakes Killing DTC Cash Flow)

Most DTC founders I talk to are profitable on paper but feel broke every single month. And here's the thing, it's not because you're spending too much. It's not because your margins are bad. It's because your cash is hiding in 5 very specific places inside your business. Today I'm going to show you exactly where to find it, how much you probably have sitting there right now, and how to free it up in the next 30 days. Let's get into it. Hey, I'm Lara from Move Supply Chain. I've spent 17 years in supply chain from big enterprise all the way to DTC brands. And I can tell you that the cash problem is one of the most common and most misdiagnosed issues I see. Founders come to me saying things like, we're growing too fast, we're profitable, but I'm always stressed about cash, or I can't seem to get ahead and every time I have money, it disappears. And almost every single time, the issue isn't the business model. The issue is that cash is getting trapped. In the supply chain. So in this video, I'm going to walk you through the 5 places it hides, show you how to calculate exactly how much you have stuck there right now, and give you the levers to pull to get it back. And yes, I'm going to give you actual numbers, no vague advice here. Now first, let me explain what I call the cash gap. Here's what happens in a typical DTC brand. You place a purchase order with your supplier, you pay them usually 30% of upfront, 70% before shipment, then the goods travel, they sit in your warehouse, you sell them, and then if you're selling on Amazon or through a retailer, you wait 30, 60, sometimes 90 days to actually get paid. So there's a gap, a gap between when cash leaves your account and when cash comes back in. And the bigger your business grows, the bigger that gap gets. I once worked with a brand doing $3 million a year who had no idea they had $180K tied up in the gap. At any given time. They thought they had a revenue problem. They actually had a cash flow timing problem. So here's a metric for this. It's called your cash conversion cycle or CCC. And once you know where the cash is hiding, I'll show you how to calculate yours in about 10 minutes. But first, the 5 places. Place number 1, excess inventory. This is the biggest one. And every unit sitting in your warehouse that isn't moving is cash that isn't working. And most brands I work with are holding 60 to 90 days of inventory when they only need 30 to 45. Why? Because they're scared of stockouts. I get it. Stockouts are painful, traumatic. You lose sales, you disappoint customers, you have to scramble. But here's the truth. Overstacking is just as dangerous as understacking, and it just kills you slowly instead of quickly. A quick check right now, take the value of your current inventory and divide it by your average monthly cost of goods sold. If that number is bigger than 1.5, meaning you're holding more than 6 weeks of stock, you have cash that you can free up. One of my clients did this exercise and found $80K sitting in slow-moving SKUs they had not reordered in 6 months. They run a bundle promotion, cleared the stock, invested that cash into their top sellers. $80K unlocked in 30 days. Place number 2, unfavorable supplier payment terms. This one is completely invisible to most founders, and it's 100% negotiable. If you're paying your supplier 30% deposit and 70% before shipment, your cash is gone for 60, 90, sometimes 120 days before you see any return. That's the industry default, but it's not the only option. The goal is to move toward net 30, net 60, meaning you pay 30 to 60 days after shipment. Big brands do this automatically. Small brands think they can't, but I've helped brands doing as little as 500K a year negotiate better payment terms just by having the right conversation at the right time, and sometimes in person. Here's the exact line to use: We've been working together for X time, we've placed X orders, and we're planning to grow our volume by X% this year. We'd like to discuss moving to net 30 terms on our next order to support our growth, and we see this a long-term partnership. That's it. You're not begging, you're not possessioning. It's a partnership move. Most suppliers will at least meet you halfway, especially if you have a track record with them, and this is best done in person. So if you can visit your vendor, that's the best move. Place number 3, the dead SKUs. Every product catalog has them. The SKUs that used to sell okay, or that you launched with high hopes, that are now just sitting there taking up warehouse space, tying up order budget, quietly costing you storage fees every single month. I call this zombie SKUs. They're not quite dead, but they're not really alive either, and they are bleeding your cash slowly. Here's how to find them. Pull your SKU level sales report for the last 90 days. Any SKU with less than 10 units sold in 90 days and more than 30 days of stock on hand That's a zombie. What do you do with them? You have 3 options: bundle them with a top seller, run a clearance promotion, or discontinue and liquidate. Pick one, don't let them sit. I had a client with 47 SKUs, 12 of them were zombies. When we cleared those out, it freed up $60K in working capital and cut their warehouse cost by 18%. Place number 4, your 3PL fees. This is the one surprises people every time I bring it up, but your third-party logistics provider, your warehouse, might be holding your cash hostage through fees you don't even know you're paying. Peak fees, receiving fees, special handling fees, storage minimums, bin fees, pallet fees. I've seen 3PL invoices with 22 separate line items and founders who just auto-pay without over-reading them. One brand I work with has paying $4,200 a month in fees they could have negotiated or eliminated entirely. That's $50K a year gone, not because the 3PL was dishonest, just because nobody ever pushed back. Your action item: pull the last 3 3PL invoices, edit line by line. For every fee you don't understand, email your account manager and ask them to explain it. Then ask which ones are negotiable. You'll be surprised. And if your 3PL charges long-term storage fees on inventory over 180 days old, That's another reason to deal with your zombie SKUs immediately. Place number 5, freight timing and mode choices. Last one, and this is a big one if you're sourcing internationally. Most TTC brands default to air freight when they're running low on stock, and I understand why. It's fast, it solves the problem immediately, but air freight can cost 4 to 6 times more than sea freight, especially in our situation right now. With the Middle East wars. And if you're air freighting regularly because your reorder timing is off, you're paying a massive cash penalty for a planning problem. So here's the math. If you're moving a container that would cost $4,000 by sea, but you're paying $18K by air because you waited too long, that's $14K in unnecessary spend per shipment. Some brands are doing this 4, 5, 6 times a year. The fix isn't to never use air freight. Sometimes you need it. The fix is to plan your reorders far enough ahead that air freight is a choice, not a panic decision. And if you find yourself booking air freight more than once a quarter, that's a signal your reorder system needs work. That's a separate video which I'll link below. Okay, now that you know where the cash is hiding, let me show you how to measure the full picture. Your cash conversion cycle formula, ECC, is equal to days inventory outstanding plus days sales outstanding minus days payable outstanding. Days inventory outstanding is how long your stock sits before it sells. Take your average inventory value, divide by your daily COGS. If you hold $150K in inventory and your COGS is $5,000 a day, that's 30 days. Days sales outstanding is how long to collect payment after sale. So Shopify direct, 1 to 3 days. Amazon is 14 to 21 days. Wholesale, sometimes 30 to 90 days. Days payable outstanding is how long before you pay your suppliers. If you pay upfront, this is close to zero. Net 30 terms means 30. So your CCC, DIO plus DSO minus DPO, a healthy DTC brand targets under 45 days. I've worked with brands at 120 days. That means for every dollar of revenue, their cash is locked up for 4 months. Run this calculation today. Whatever number you get, write it down. That's your starting point. Alright, you found the cash. Here's your 30-day plan to start freeing it. Week 1, run your inventory audit. Find your zombie SKUs. Launch a bundle of clearance or anything over 90 days old. Week 2, pull your last 3PL invoice. Flag every fee you don't recognize. Email your account manager. Week 3, calculate your cash conversion cycle. Get your number, then email your top supplier and open the payment terms conversation. Week 4, audit the last 4 freight bookings. How many were air when they could have been sea? Calculate what that cost you. Then look at the reorder calendar and identify where you can build more lead time. That's it. 4 weeks, 5 places, and I bet my supply chain career that you'll find at least $30K to $100K sitting in your business right now that you didn't know was there. So let's bring it home. The 5 places your cash is trapped: 1. Excess inventory— you're holding too much stock. 2. Bad supplier payment terms— you're paying too early. 3. Dead SKUs— zombie products draining warehouse cash. 4. Hidden 3PL costs— you're paying without knowing. 5. Reactive freight decisions— paying air freight prices for a planning problem. Now pick one this week, just one, and take one action on it. If you want help doing this with your actual numbers, that's exactly what we do at Move Supply Chain. Book a call at movesupplychain.com and let's find your trapped cash together. And if this video helped you, subscribe. I put out supply chain content every week specifically for DTC brands. Real numbers, real strategies, and no fluff. Drop a comment below and tell me which of these 5 places do you think most of your cash is writing. I read every single comment. Now I'll see you on the next one.