How much cash would we free up by holding fewer days of inventory?
Every day of stock you hold is a day of cost of goods sold tied up in cash. Cut the days and that cash comes back once. The yearly holding cost you no longer pay is a different measure and is shown apart, never added to the cash.
Your assumptions
Worked-example values — replace with yoursKeep each item at its service target: release the cash from B, C and slow stock first, not from A items that must stay in stock.
This is an estimate. Check it on your own data.
This uses one average for the whole business. The cash really sits in a few product families and slow movers; seeing it by family on your own stock is what a workspace does.
Check it on your own data → Your inputs go with you in the link and stay in this browser; nothing is sent to ADEXMA until you submit a form.
Starter checkout and carrying these inputs into the Scan and your workspace are proposed (Wave 1, not live yet): until they ship, the buttons lead to the plans page and the free Scan, and you enter your figures there.
The formula
- cash per day of stock = cost of goods sold ÷ 365
- cash released (once) = cash per day × (days today − target days)
- holding cost saved (per year) = cash released × holding cost %
Worked example · the values pre-filled above
Cost of goods sold: $12,000,000 · Days of stock today: 90 days · Target days of stock: 75 days · Holding cost of stock: 20 % of stock value
- $12.0M ÷ 365 = $32,877 of cost of goods sold per day.
- Taking stock from 90 to 75 days releases 15 days: $32,877 × 15 = $493,151, once.
- Holding cost saved = $493,151 × 20% = $98,630 a year — shown apart, never added to the cash.
Result: $493K once · $99K a year
What this assumes
- The release is one-off: you get the cash once, then the saving continues.
- Days of stock are measured on the same basis (cost of goods sold, not sales) today and at target.
- Service levels are held — the cash must not come from items you cannot afford to run out of.
- It is an estimate from your own inputs. Results from different tools overlap and must never be added together into one savings figure.
Sources
- Brealey, R., Myers, S. & Allen, F., Principles of Corporate Finance (McGraw-Hill) — Days of inventory and working-capital arithmetic.
- Silver, E., Pyke, D. & Thomas, D., Inventory and Production Management in Supply Chains (CRC Press, 4th ed.) — Inventory carrying cost and its components.
Questions people ask
How much cash would fewer days of inventory release?
Cost of goods sold divided by 365, times the days you remove. At $12.0M of COGS, cutting 15 days releases about $493,000, once.
Is the holding-cost saving part of the cash?
No. The cash comes back once; the holding cost is a yearly saving on that cash. The tool shows them apart so they are never added together.
What holding cost should I use?
Use your own cost of capital plus storage, handling, insurance and obsolescence. The 20% default is a planning placeholder, not a benchmark.
Related tools
On your own data, Chloé picks up this finding in a workspace and your advisor confirms it. See the plans →