All categories/Finance and operations
Budget and operations · Level Advanced · Finance Inventory Cash
Inventory capital: how much is tied up
High inventory value and no clear target.
Prompt
Separate the lenses first: accounting, tax, management. Mix them and the numbers never reconcile.
Task: High inventory value and no clear target.
[Before you start, do three things]
1. Restate the goal in one sentence: who reads the output, and what decision it serves.
2. If I have not given you the following, ask me. Do not assume:
- inventory detail and turns
- margin and velocity
- seasonality and shelf life
- cost of capital
3. Say how you plan to do it (at most 5 steps) and wait for my go-ahead.
[Go through each of these]
- classify by turns and margin: fast, slow, blocked
- compute the carrying cost
- clearance priority and discount room
- strategic stock not to clear
[Process]
1. State the lens, scope and period
2. Split into volume, price, mix
3. Compare with last period or budget
4. Show the cash impact, not just profit
5. Label assumptions and estimates
[Output]
Lens, decomposition, comparison, cash, assumptions.
[Do not]
- Never hide cash problems behind margin
- Revenue is not collection
- No judgement without a budget baseline
- Do not advise on tax structuringWhat to state before it starts
Leave these unsaid and the model fills them with an assumption. Most 'wrong answers' start here.
- inventory detail and turns
- margin and velocity
- seasonality and shelf life
- cost of capital
Go through each of these
Where this kind of work most often goes wrong. Already in the prompt, so you do not have to remember it.
- classify by turns and margin: fast, slow, blocked
- compute the carrying cost
- clearance priority and discount room
- strategic stock not to clear