From Borrowing More to Releasing More

The first step was understanding inventory quality. Inventory was classified into: Fast Moving, Moderate Moving, Slow Moving, Non-Moving, Dead Stock Near Expiry Stock. The findings were revealing. Large quantities of inventory had either not moved for extended periods or were moving far slower than management realised. Yet fresh inventory continued to be purchased every month.

The recovery programme was not welcomed by everyone. Company representatives preferred focusing on fast-moving products.

Their objective was simple: Generate fresh orders, Increase sales volume, Push new schemes, My objective was different.

Release trapped cash. As slow-moving and non-moving inventory was pushed into the market, resistance increased. Representatives argued that customers would not accept, such products. Complaints were raised with management. Concerns were escalated to the principal company. The feedback was consistent. “This is not how we normally do business.” Fortunately, the Managing Director remained supportive. His response was simple:

“Let him do what he is doing.” That support became critical. 

A structured inventory recovery programme was implemented. Dead Stock: Dead inventory was liquidated at discounted prices.

The objective was not margin protection.

The objective was cash recovery. 

Near Expiry Inventory: Special schemes were introduced to accelerate movement before expiry.

Slow Moving Inventory: Customers purchasing fast-moving products were encouraged to take selected slow-moving items as part of broader commercial arrangements. Many initially resisted.

Over time, inventory that had remained untouched for months began moving.

The philosophy was simple.

Inventory sitting in a warehouse creates no value. Cash does.

By May 2024, the inventory rationalisation programme had begun to gain momentum.

Dead stock was being liquidated. Slow-moving inventory was being pushed into the market.

Near-expiry products were being cleared. From a finance perspective, the results were encouraging. From a sales perspective, they were controversial. Company representatives began questioning the approach. Several argued that management should focus on generating fresh orders rather than clearing ageing inventory. One representative remarked during a review discussion:

“Why are we pushing products customers don't want? We should focus on products that move quickly.” From his perspective, the argument was logical. From a working capital perspective, it was exactly the problem.

Every new order increased inventory commitments while existing slow-moving inventory continued consuming cash. The objective was not to sell more inventory.

The objective was to convert existing inventory into cash. The distinction was important. Not everyone agreed.

The inventory rationalisation programme delivered immediate and measurable results. By systematically classifying stock into fast-moving, slow-moving, near-expiry and dead inventory categories, the business was able to identify significant amounts of cash trapped in non-productive stock. Through targeted liquidation, promotional schemes and improved inventory discipline, approximately ₹1 Crore of working capital was released. More importantly, inventory levels became healthier, stock visibility improved and management gained greater control over future purchasing decisions.

Key Outcome: ₹1 Crore of cash released without additional borrowing.

A decision was made to gradually move customers towards advance payment.

Resistance was immediate.Customers complained. Several escalated concerns directly to management. Sales slowed sharply.

For nearly two weeks, business activity reduced significantly. The Managing Director called and asked:“What is happening?”

My response was simple.

“Give me some time.”

The resistance became even stronger when customer credit policies were reviewed.

Historically, customers had become comfortable receiving 7–15 days credit.

For many customers, credit had become an expectation rather than a commercial concession. When advance payment requirements were introduced, the response was immediate. Phone calls increased.

Complaints increased. Several customers contacted senior management directly.

Some openly stated:“If credit is stopped, we will move our business elsewhere.”

For nearly two weeks, sales slowed dramatically. Orders that would normally arrive every day stopped appearing. The atmosphere became uncomfortable. Employees became nervous. Representatives became vocal.

Management became concerned. For the first time, genuine doubt began to emerge.

One afternoon, the Managing Director called.

His question was simple.“What exactly is happening?” Sales had fallen. Customers were unhappy. Representatives were complaining. Pressure was increasing from every direction. My response was equally simple. “Give me some time.” At that stage there were no guarantees. The strategy could still fail. Customers could refuse the changes.

Sales could continue declining.  The easiest decision would have been to return to the previous model. Continue giving credit.

Continue carrying excess inventory. Continue waiting months for claims. Continue borrowing more money. Instead, the programme continued. 

 The easiest decision would have been to reverse course. The right decision was to stay the course.

To encourage adoption, a structured incentive programme was introduced. Customers paying in advance received an additional 1% commercial benefit. Credit periods were reduced significantly.

Initially there was strong resistance. However, commercial reality eventually prevailed. Within two to three months, most customers had transitioned towards advance payment arrangements. 

Within two to three months, customer behaviour began changing. Advance payments increased. Collection cycles shortened.

Outstanding receivables reduced significantly.

Most importantly, the business no longer needed to fund customer operations from its own working capital. What initially appeared to be a sales risk gradually became a cash flow improvement programme.

 What initially appeared to be a sales risk gradually became a competitive advantage. Improved liquidity enabled faster inventory replenishment, stronger supplier relationships and better commercial flexibility. 

Through disciplined collection management and customer payment restructuring:

• Customer credit reduced substantially 
• Collection cycles improved 
• Cash availability increased 
• Dependence on external funding reduced 

"The objective was never to stop selling. The objective was to stop financing the market."

The next battle involved claim recoveries.

At any point in time, ₹1–1.5 Crore remained blocked with the principal company.

The situation created significant frustration.

Customers received scheme benefits immediately. The distributor funded the cost immediately. Yet reimbursement often took months. Repeated follow-ups produced limited results. 

As delays continued, the issue was escalated beyond routine operational discussions. Several conversations took place with senior representatives of the principal company. The concern was straightforward.

The distributor funded the schemes.

Customers received the benefit immediately.

Yet reimbursements often took months to arrive. The message was clear:

"If distributors are expected to support market growth, reimbursement cycles must support distributor liquidity."

The discussions were not always comfortable.

However, they proved productive.

Discussions took place directly with senior leadership of the principal company.

The message was straightforward:

“The distributor cannot continue financing the entire process indefinitely.”

The discussion was uncomfortable.

But it was necessary.  As discussions continued, the matter eventually reached senior leadership. The issue was no longer individual claims. It had become a working capital and distributor sustainability issue. Shortly afterwards, a structured resolution process began to emerge. 

Shortly afterwards, historic claims began getting released. More importantly, a structured monthly settlement process was introduced.

For the first time, predictability replaced uncertainty.

₹70–80 Lakhs Released Through Claims Recovery

• Historic claims settled 
• Monthly settlement cycle established 
• Predictability improved 
• Liquidity strengthened