Cash Flow for Market Traders: Stock, Float and Slow Weeks

What this guide covers

1. Why profitable traders run out of money
2. The cash cycle: from buying stock to money back in hand
1. A worked example
3. Float versus profit
1. How much to hold back
4. Dead stock and how to spot it early
5. Pay yourself a fixed drawing
6. Slow months and planning for January
7. A one-page weekly sheet you will actually keep
8. When supplier credit helps and when it traps you
9. Start this week, not next month
10. Related guides

You can be profitable and still be broke. It happens to good traders constantly, and almost never because they were bad at selling. It happens because every rand of profit went back into stock, and then the stall fee, the taxi fare and the school shoes all arrived in the same week.

Profit is what is left after every cost is counted. Cash is what is in your hand on a Tuesday. They are not the same number and they do not arrive at the same time, and the trader who understands that gap survives slow months.

Below: the cash cycle, how much to hold back as float, spotting dead stock early, why a fixed drawing beats dipping, planning for January, a one-page weekly sheet, and when supplier credit helps rather than traps.

Why profitable traders run out of money

Picture a trader with R6 000. She buys R6 000 of stock, sells it over three weeks for R10 000, and is delighted. Then she buys R10 000 of stock, because why leave money idle, and sells it over four weeks for R16 000. Profit again. On paper she is doing everything right.

Then the stall fee is due, a supplier wants paying, and her phone dies. She has R900 in her pocket and R15 000 sitting in boxes. She is profitable and she cannot pay, so she discounts to raise cash, which turns a good margin into a thin one. Nothing in that story is a selling problem. It is a timing problem: money left immediately and came back gradually, and the bills did not wait for the shelf to empty.

The cash cycle: from buying stock to money back in hand

Your cash cycle is the number of days between paying for stock and having that money, plus the mark-up, back in your hand. The shorter it is, the more times a year the same rand works for you.

1. You pay for stock. Cash leaves. This is day zero.
2. Stock sits. In transit, in the storeroom, on the table before anyone buys.
3. You sell. Some fast, some slowly, some never.
4. You get paid. Immediately on cash and card, days later if card money settles slowly, weeks later if you supply a shop on terms.
5. Cash is back. Only now can it buy the next lot.

A worked example

These figures are illustrative only, chosen to show the arithmetic rather than any real product or price. Say a trader buys 100 units at R38 each and sells at R85.

The full cycle took about 45 days, not the “few weeks” it felt like. Margin looked healthy at R47 a unit, but R3 800 was locked away for six weeks, R800 went to fees, R1 500 to the household, and 10 units never sold. The trade was fine. The point is that had she spent the full R5 000 on day 0, she would have reached day 14 with nothing to pay the stall fee. That R1 200 held back is the whole difference between a calm month and a panicked one.

Float versus profit

Float is working cash you deliberately do not convert into stock. It pays fees, transport, packaging and small emergencies, and it lets you buy a bargain the day it appears. Profit is a result you calculate. Float is a decision you make.

A useful test: if a supplier offered a genuine deal tomorrow and you could not take it without borrowing, you have no float. If a stall fee falling due would force a discount sale, you have no float.

How much to hold back

There is no universal figure, and anyone who gives you one is guessing about your business. The more unpredictable your selling, the more float you need. As a starting point, many small traders hold back roughly a quarter to a third of available cash, then adjust after watching a few months.

Dead stock and how to spot it early

Dead stock does not look like a loss, because the boxes are still there and you can tell yourself it will move. But money in a box nobody wants is money you cannot use, and every month it sits it is worth less.

You do not need a system to catch it, you need a date. Write the buying date on every carton in koki, then apply a simple rule:

• 30 days: if under a third has sold, something is wrong. Move it to the front of the table, change the price point, or bundle it with a fast seller.
• 60 days: discount properly. Not R5 off. Enough to actually clear it.
• 90 days: treat it as cash to rescue, not profit to protect. Sell at cost, in a bulk lot to another trader if need be.

The hardest part is emotional, because discounting feels like admitting the buy was wrong. It was, and that is fine, but the money does not come back by waiting. Our guide on spotting quality versus cheap stock helps you buy fewer duds in the first place.

Pay yourself a fixed drawing

Most small traders do not pay themselves. They dip. R200 for lunch, R500 for airtime, R1 000 because the electricity is off. It feels harmless and it is invisible, which is the problem: at month end there is no line called “what the owner took”, so the business looks worse than it is.

Fix it with one habit. Decide an amount you can genuinely take, pick a day, and take exactly that from the business to your personal money. Then stop dipping. Your float stops leaking, and raising your drawing means growing the business. If the fixed amount is too little to live on, that is important information rather than a failure.

Slow months and planning for January

South African trading has a rhythm and it is not gentle. November and December are strong for most traders. January is brutal: school fees, uniforms, stationery, a long month after a short-paid December. The trap is that December feels like abundance, so it is tempting to read that as normal and buy heavily in early January. Then nothing sells for five weeks. Practical defences:

• Ring-fence a January float in November, before December distorts your judgement, and treat it as untouchable.
• Buy light in early January. A thin table that sells beats a full one that does not.
• Stock what January needs: school and stationery lines, lunchboxes, basic household items.
• Clear festive stock before it turns. Christmas decor held for eleven months is a loan you made to yourself at a terrible rate.

Our seasonal stock calendar for South African traders maps the year, and the Black Friday and festive trading playbook covers the peak that funds the trough.

A one-page weekly sheet you will actually keep

Accounting software is excellent and most market traders abandon it within a month. Something you fill in every Sunday in five minutes beats something perfect you stop using. Rule five columns in an exercise book and fill one row a week:

Once a month add a sixth number: roughly what your unsold stock cost. Cash plus stock at cost is what the business is worth in working terms, and that line over six months tells you more than any single month’s profit. If cash falls while stock climbs, you are buying too much. If both fall, look hard at margins and costs, and re-read our guide on how to price products for resale.

When supplier credit helps and when it traps you

Getting stock now and paying later shortens your cash cycle. Instead of funding stock for 45 days you might fund it for 15, which is the cheapest working capital a small trader will ever get. Used badly, it is how businesses end: credit lets you buy stock you could not otherwise afford, which means more stock than you can sell. Now you owe money on boxes that are not moving, and the payment date does not care.

The honest test before accepting terms: if this stock did not sell at all, could you still pay on the due date? If yes, the credit is a convenience. If no, it is a bet, and you should know you are placing one. Suppliers extend terms to traders they trust, and trust is built by paying early on small amounts. Start smaller than you are offered.

Frequently asked questions

Why is my business profitable but I have no money?

Because profit and cash arrive at different times. You pay for stock immediately and recover the money gradually as it sells, while fees, transport and household costs fall due in between. Convert every rand of profit straight back into stock and you will be profitable on paper and short of cash in practice.

How much cash should a small trader keep instead of buying stock?

There is no fixed rule, but many small traders hold back roughly a quarter to a third of available cash as float rather than converting all of it. Hold more if your selling is seasonal, your costs are fixed, or you supply shops on terms. Watch what actually happens over a few months and adjust.

What is dead stock and how do I get rid of it?

Dead stock has stopped selling and is tying up cash. Write the buying date on every carton. If under a third has sold in 30 days, change the price or the placing. At 60 days discount properly, and at 90 days sell at cost to recover the cash, even in a bulk lot.

How do I plan for slow months like January?

Set aside a January float in November, before December’s busy trading distorts your judgement, and treat it as untouchable. Buy light in early January and sell down existing stock. Stock what January needs, such as school and stationery lines, and clear festive stock before the season ends.

Should I pay myself a salary from my trading business?

Yes. Decide an amount, pick a day, and take exactly that from the business, then stop dipping. Dipping is invisible, so it makes the business look worse than it is and quietly drains the float. A fixed drawing shows you honestly whether the business can support you.

Is supplier credit a good idea for a small trader?

It can be, on proven stock that sells within the payment term. It becomes dangerous when it lets you buy stock you could not otherwise afford, because the payment date arrives whether the stock sells or not. Ask yourself whether you could still pay on the due date if nothing sold.

Start this week, not next month

Count your cash tonight and write it down, along with what your unsold stock cost. Decide your drawing and the day you take it. Then rule five columns and fill in one row every Sunday. Within two months you will see the shape of your own business, which is what lets you buy confidently instead of hopefully.

Then buy in a way that respects the cycle: smaller test quantities on new lines, deeper on what you know moves. Durban China City is at 269 Inanda Road, Springfield Park, open 09:00 to 17:00 seven days a week with on-site parking. Our guide on buying wholesale, minimums and trade prices explains carton pricing.

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• a simple business plan for a trading business

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