Fractional CFO support for Langley distributors and wholesalers

The cash conversion cycle is the whole business

Take the average number of days stock sits before it sells, add the average days a customer takes to pay, subtract the days the supplier allows before payment is due. The result is how long the business funds its own trading, and it is the single number that explains why a profitable distributor is short of cash.

It is also actionable in three separate places. Days in stock respond to purchasing discipline and range decisions. Days in receivables respond to terms, invoicing speed and collections. Days in payables respond to supplier negotiation. Each is a different conversation with a different person, and a business that has never measured the cycle usually finds it is holding weeks more working capital than it needs to.

Margin by line, not margin overall

A blended gross margin conceals more than it reveals. Within it there is usually a small group of lines carrying the business, a middle that is adequate, and a tail that is genuinely unprofitable once the cost of holding it is counted. That tail persists because nobody has ever attributed the carrying cost to it.

Attributing it properly means loading each line with what it actually consumes: landed cost including freight and duty, the working capital tied up over its average shelf time, the write-downs it generates, and the handling it requires. Lines that survive that test earn their space. Lines that do not are either repriced, reduced or dropped — and dropping a line that was losing money frees both cash and warehouse capacity.

How purchasing decisions turn into cash decisions

Container economics, minimum order quantities and volume breaks all push a distributor toward buying more than it immediately needs, and the discount is visible while the cost of holding the extra stock is not. A larger order that improves unit cost by a few percent while doubling the weeks of inventory carried is frequently a worse decision, and it never looks like one on the purchase order.

Where buying is in United States dollars there is a second layer. The margin on a line can be eroded entirely by currency movement between order and settlement, and a business that prices in Canadian dollars from a historical exchange assumption is carrying an exposure it has never quantified. Neither issue requires sophisticated treasury management — it requires the exposure being visible before the order is placed.

Supplier terms, customer terms and the operating line

The three sources of trading finance are the supplier, the customer and the bank, and they are usually negotiated by different people at different times with no view of the whole. Extending supplier terms by fifteen days can be worth more than a rate reduction on the operating line, and it is often available simply because nobody has asked.

On the customer side, terms are frequently a legacy of what was offered years ago rather than a current decision. Tightening them across the board is rarely realistic; identifying which accounts consume the most working capital relative to the margin they contribute usually is, and that is a short piece of analysis with a direct cash outcome.

Passing on a cost increase

When supplier costs rise, the practical question is not whether to raise prices but how quickly and on which lines. A distributor selling from stock bought at the old cost has a window in which margin looks healthy and is about to compress, and the businesses that manage this well are the ones that saw the compression coming rather than discovering it in a quarterly result.

The analysis is straightforward: which lines can absorb an increase without volume loss, which are price-sensitive enough that a rise costs more than it recovers, and where the replacement cost of current stock now sits relative to its selling price. Doing that before the increase lands is a meaningfully different exercise from reacting after it.

When a distributor does not need this yet

If the inventory system is not accurate, if landed cost is not being captured per line, or if the books are behind, that is the work to do first. Every piece of analysis above depends on reliable underlying data, and building a forecast on an inventory record nobody trusts produces confident-looking output that is wrong.

The threshold where part-time CFO support starts to pay is usually a specific pressure: growth outrunning the operating line, a margin decline nobody can locate, a supplier or customer concentration that has become uncomfortable, or a decision about a warehouse or a new product category. Absent one of those, better bookkeeping and a proper year end are the better investment.

How the engagement runs

EverStone is a sole practitioner CPA firm with one office, in Abbotsford, and no Langley location. The work is delivered remotely through video calls, secure document exchange and electronic signature, with scope, cadence and cost agreed in writing before anything starts.

This suits incorporated wholesalers and importers, equipment and parts distributors, building-supply businesses and light manufacturers holding raw material. Because the same CPA also prepares the year end and the corporate return, the analysis starts from figures that are already reconciled. Related pages: Langley inventory business accounting and the inventory accounting guide.