Imagine: last month the business sold 10 million AMD worth of goods, and this month 15 million. Sales are up 50%, the numbers look great and spirits are high.
Then comes the most important question:
— OK, so where's the money?
A sale isn't money yet
Selling 15 million AMD worth of goods doesn't mean 15 million AMD is available to the business. The money doesn't vanish — it simply ends up in different places.
In clients' debts. If a client bought 2 million AMD of goods but will pay next month, the sale already exists but the money doesn't yet. That's why high turnover can go hand in hand with a cash shortage.
In capital tied up in stock. A growing business has to buy more goods. Every item in the warehouse is money already paid but not yet sold. The longer goods sit in stock, the longer that capital is frozen and can't be used for anything else.
In costs. More sales also mean more staff, deliveries and packaging. If costs grow as fast as sales or faster, higher turnover doesn't mean an equal rise in profit.
Example: from 15 million in sales to real money
Let's continue the same example. First, the month's profit (in million AMD):
- Sales: 15
- Cost of goods sold: −9
- Salaries, rent, delivery and other costs: −3.5
- Profit (before tax): 2.5
It looks as if the account should hold 2.5 million AMD more at the end of the month. Now let's see what actually happened to the cash (in million AMD):
- Profit: 2.5
- Clients haven't paid yet: −3
- Extra stock bought to support growth: −2
- Payment to suppliers postponed: +1
- Change in cash: −1.5
So sales grew by 50%, the business is profitable, and yet the cash in the account went down by 1.5 million AMD. That's not a mistake — it's a natural result of growth that you need to spot in time.
Turnover ≠ profit ≠ free cash
That's why “how much did we sell?” isn't enough. You also need to know how much we received, how much we spent and how much is left.
To do that, a manager should regularly keep an eye on:
- sales volume and payments received,
- what clients owe and what you owe suppliers,
- stock levels,
- the main costs and profit.
What matters is seeing how they connect. As in the example above, sales can grow at exactly the moment when debts and capital frozen in stock are growing too.
A quick check
If someone asks “how much did you sell?”, you can probably find the answer quickly. But what if they ask:
- How much free cash do you have right now?
- How much do clients owe you, and how much do you owe suppliers?
- How much capital is tied up in stock?
- What is your real profit?
If answering means opening five Excel files, calling three people and trying to remember “which file was that number in?”, the problem isn't the numbers — it's that they're kept separately.
For a small business, Excel is often enough. But as orders, products and transactions grow, it makes more sense to see sales, stock, cash and debts in one overall picture. That's exactly what business management systems such as TM Hub are built for: the answers to those questions are gathered in one place.
In summary
Sales growth is good news, but more sales don't automatically mean more free cash. The money may be sitting in clients' debts, in stock, or already spent on the business's day-to-day needs.
In the end, the most important question isn't just “how much did we sell?” but “how much of those sales is actually left?”.
