Ahmadreza SamadiThe sale happened. The cash is still on its way.
Sales alone do not tell Sami how much cash is available today.
Original English animated explainer with synthetic narration, English captions and the AS+a-samadi.com watermark. Sami, the lamp workshop and the numbers are fictional teaching devices. The arithmetic illustrates timing averages, not actual business data, released cash, a dated cash forecast or personalised financial advice. Agreed supplier-payment terms still apply.
Read the English film transcript
Sami makes lamps in a small, fictional workshop. Orders are growing. But every month, cash feels tight. The orders became sales in our example. The problem is timing. Money leaves the workshop long before it comes back. One way to see that timing is the
cash conversion cycle. BDC, Canada’s business development bank, describes it as average inventory days, plus average receivable days, minus average payable days. In Sami’s workshop, those are three clocks on a rail. The inventory clock. In our example, materials and finished lamps wait on the
shelves for 30 days, on average. The collection clock. After a sale, customers take 20 days to pay, on average. The supplier clock. Sami pays his suppliers 15 days after buying, on average. 30 plus 20, minus 15, is 35 days. For about 35 days,
Sami’s cash is tied up in the work. If customers paid 5 days sooner, with everything else the same, the cycle would be 30 days. That’s arithmetic for our example, not a forecast. The cycle uses averages. It isn’t a dated forecast of your cash
balance, and there’s no single right number for every business. Supplier payments should still follow the terms you agreed. So map the timing before assuming more sales will fix your cash. Check three clocks: inventory, collection, and suppliers. In this credit-sale example, the sale comes
first. Cash arrives later. Ahmadreza Samadi. More at a-samadi.com