A jewellery wholesaler's biggest constraint is often not demand but cash. Money goes out to the factory weeks before stock arrives and comes back from retailers weeks after it is delivered. Planning that cycle is what separates steady businesses from stressed ones.
The cash cycle
- Advance to factory: paid at order.
- Balance to factory: paid on approval before dispatch.
- Stock in warehouse: cash tied up until sold.
- Credit to retailers: cash tied up until collected.
The longer each stage, the more working capital you need.
Plan by season
Map the year: when you must pay factories for peak stock, and when retailers pay you after the peak. The gap between those dates is your funding need.
| Period | Cash out | Cash in |
|---|---|---|
| Months before peak | Advances and balances | Low |
| Peak | Re-orders | Rising |
| After peak | Low | Collections |
Ways to ease the cycle
Batch-wise orders. On large orders, split production and payment into batches aligned with your sales. At Jagruti, batch-wise payment is available for 1,000+ unit orders.
Focus on fast sellers. Stock that sells quickly returns cash quickly. Cut slow designs.
Tighter retailer credit. Clear credit limits and periods. Follow up on time.
Early orders for peaks. Ordering early is not only about stock availability; it spreads your payments over more weeks.
Avoid over-ranging. Too many designs at the minimum ties up cash without adding sales.
Watch these numbers monthly
- Stock value by design and age
- Receivables by retailer and age
- Payments due to factories
- Expected collections
Using factory terms well
Pay advances and balances on time. Reliable payers get priority when factories are busy, which protects your peak sales. Clear, written terms help you plan precisely. Read payment terms with manufacturers.
A simple cash plan you can build in an hour
List every order you plan for the next six months. For each, write the advance date and amount, the balance date and amount, and the month you expect the stock to sell. Then list expected collections from retailers by month. Subtract outflows from inflows month by month. The lowest point is the working capital you need. Update it every month, and you will see a cash crunch coming weeks before it arrives.
Do not starve your bestsellers
When cash is tight, the temptation is to cut every order equally. Cut slow designs first and protect stock of your fastest sellers, because they are the ones that turn back into cash.
The cash conversion cycle, with numbers
The cash conversion cycle is the number of days money is tied up between paying your supplier and collecting from your customers:
Cash cycle = days of stock + days customers take to pay - days you take to pay suppliers
| Item | Example |
|---|---|
| Stock is held on average | 60 days |
| Retailers pay after | 45 days |
| You pay the factory (advance and balance) | minus about 30 days before goods arrive, so effectively 0 |
| Cash cycle | about 105 days |
With a cycle of about 105 days, each rupee in the business turns over roughly three and a half times a year. Cut stock days to 45 and retailer credit to 30, and the cycle falls to 75 days, nearly five turns a year, with no change in margin.
Seasonal cash planning
Jewellery wholesale needs the most cash just before the peaks: factory advances for Navratri and Diwali stock go out in July and August, while the money comes back in October and November. Plan for that gap. Options include keeping a reserve from the previous season, arranging a working capital limit with your bank before you need it, and agreeing batch-wise delivery with the factory so payments are spread.
Warning signs
- Paying suppliers late because retailer payments are late
- Discounting stock to raise cash before a peak
- Growing sales but a shrinking bank balance
Any of these means the cash cycle is too long for the business's size. Fix the cycle before adding new designs or territories.
Sources of working capital
- Your own reserve, built from previous seasons' profits
- A bank working capital limit (overdraft or cash credit) against stock and receivables, arranged before the season
- Supplier terms, such as batch-wise payment on large orders
- Faster collections from retailers, with small incentives for prompt payment
Arrange bank limits in a quiet month, not in August when you need the money for Diwali stock. Banks take time to process, and a business that plans ahead looks stronger when it applies.