How Over-Purchasing Inventory Nearly Broke Our Client — And What We Did About It
For many fast-growing consumer brands, strong sales figures often mask deeper issues. That was the case with one of our clients—a well-loved DTC brand with strong product-market fit, growing demand, and what seemed like all the right ingredients for success. On the surface, the numbers looked great. But behind the scenes, something wasn’t adding up.
They had solid revenue but a constant squeeze on cash.
Marketing was underfunded. Hiring plans were put on hold. Even critical restocks were being delayed. When the founder reached out to us, they didn’t know exactly what was wrong—only that the business felt more strained than it should. Our job was to find out why.
Diagnosing the Problem: Strong Sales, Weak Liquidity
After a quick diagnostic, the problem became clear: Over-purchasing inventory had created a bottleneck.
In the race to stay ahead of demand, the team had placed large orders across the board, hoping to avoid stockouts and fulfill projected growth. But growth didn’t accelerate as quickly as expected. As a result, hundreds of thousands of dollars were tied up in unsold inventory, locking up cash that was critical for day-to-day operations.
And because much of the inventory was seasonal or limited-run, it wasn’t just cash sitting on the shelves—it was risk.
The founder had followed the natural instinct of many product-based businesses: stock up to stay ahead. But in this case, they had unknowingly created a drag on the business’s flexibility, margins, and momentum.
What Happens When Inventory Becomes a Liability
This is a common trap for growth-stage brands, especially in industries like consumer packaged goods (CPG), fashion, and home. As demand increases, operators often feel pressure to buy larger quantities, shorten production timelines, and prevent stockouts at all costs. But this approach—without real-time visibility and financial modeling—can backfire quickly.
In our client’s case, the side effects of excess inventory included:
Marketing delays: Budget earmarked for customer acquisition was stuck in product that wasn’t moving
Operational stress: The team had limited working capital to respond to unexpected costs or pivots
Missed opportunities: Growth initiatives (like new partnerships or key hires) were pushed back
Cash flow uncertainty: Lack of a rolling forecast made it hard to plan confidently
In short: They were selling, but they weren’t scaling.
The Turning Point: Bringing Finance and Inventory Into Alignment
The first step in any turnaround is clarity. We began by giving the leadership team a full view of where things stood.
Together, we:
Analyzed inventory turns by product category, identifying slow movers and long-tail items
Mapped sales trends to purchasing behavior, highlighting where buying had outpaced demand
Integrated inventory data into a 13-week rolling cash flow model
Created visual dashboards to track real-time inventory-to-cash ratios and margin leakage
What we found was a disconnect between the team’s operating instincts and financial outcomes. The brand had strong performance in certain SKUs, but the broader assortment strategy was eating up cash with little return.
It wasn’t a supply chain issue—it was a financial strategy issue.
Implementing Guardrails Without Slowing Growth
Once we had a clear picture, we worked with the founder and operations team to build lightweight but effective guardrails into their planning process:
Purchasing Controls Based on Forecasts
We introduced purchasing thresholds that aligned with updated sales velocity, rather than historical assumptions. Reorders were tied to clear targets—actual sales, not just inventory goals.
SKU-Level Visibility
We moved the team away from “gut feel” purchasing and toward data-informed decision-making. Each product was now evaluated on its individual performance and contribution to margin, not just its aesthetic appeal or category fit.
Cash Flow-Linked Decision Making
We linked inventory planning directly to the cash flow forecast. If a large PO would create a cash dip, we modeled the tradeoffs in advance, rather than scrambling to cut costs after the fact.
Slow-Mover Mitigation Plan
For excess inventory, we helped build a promotion strategy—bundling slow-moving items with fast-sellers and creating clearance campaigns that preserved brand value.
Communication Routines Across Teams
We built a monthly cadence for reviewing inventory, forecast accuracy, and sales trends across finance, ops, and marketing. This helped break down silos and ensure the entire team was working from the same financial roadmap.
The Result: Operational Stability and Strategic Confidence
The transformation didn’t happen overnight—but within three months, the business was in a dramatically different place:
Inventory levels were rebalanced across SKUs
Cash was unlocked and redirected to growth-driving activities
Gross margins improved through smarter buying
Leadership had clarity on their financial position and flexibility to make confident decisions
More importantly, the founder stopped waking up in a panic over cash flow. They could see their run rate, understand the impact of each major decision, and focus on building—not just surviving.
Key Takeaways for Founders and Finance Teams
This story isn’t unique. Over-purchasing inventory is one of the most common missteps we see in product-based businesses—and one of the most fixable.
Here are a few principles to guide inventory and cash strategy:
Inventory is a bet on the future—don’t place that bet blindly
Forecasting isn’t about perfection; it’s about planning for scenarios. Build a range of expectations and prepare for volatility.
Tie purchasing decisions to data, not just emotion
Founders often get attached to SKUs they love. But your inventory strategy should be driven by margin, performance, and cash cycles.
Cash flow forecasting should include inventory cycles
Your cash position doesn’t just depend on sales—it depends on how quickly you turn product into cash. Integrate inventory timing into your 13-week cash model.
Slow movers don’t just clog shelves—they drain growth
Plan quarterly reviews to assess performance, run promotions, and make proactive decisions about when to discontinue or discount underperformers.
Finance and operations should speak the same language
Create shared dashboards, regular syncs, and decision frameworks that keep both sides aligned—especially when placing large POs.
Inventory Isn’t Just an Ops Problem—It’s a Finance Strategy
Too often, inventory is viewed as an operational detail, rather than a central piece of the financial strategy. But for most product-based businesses, inventory is the business. It affects your margins, your cash flow, your agility, and your ability to scale.
The good news? It’s solvable. With the right tools, processes, and visibility, inventory planning becomes a strategic advantage—not a drag on your growth.