Fix the comparison boundary before calculating
Records and assumptions to align
- Use one product/basket and one stated wholesale price and indirect-tax basis. (not complete)
- Separate product/landed cost, order handling, freight support, sales commission and expected credit/return cost. (not complete)
- Record minimum order, case pack, lead time, payment due date and expected receipt date. (not complete)
- Map production or purchase cash dates and capacity step costs. (not complete)
- Keep retailer/distributor economics separate unless their current terms are explicitly in scope. (not complete)
| Field | Required unit | Preferred evidence |
|---|---|---|
| wholesale revenue | CU/order | current quote or price list |
| sales/credit/return costs | CU/order | commission, credit-note and return records or explicit scenario |
| peak cumulative dated outflows | CU at date | purchase, payroll, freight and receipt dates |
Build a reproducible scenario
wholesale order contribution = wholesale revenue - product/landed cost - order handling - freight support - sales/credit/return costs; cash gap = peak cumulative dated outflows before customer receipt
- wholesale revenue
- Accepted wholesale units multiplied by the ex-tax trade price (CU/order) — current quote or price list
- sales/credit/return costs
- Only included order-level costs under the declared boundary (CU/order) — commission, credit-note and return records or explicit scenario
- peak cumulative dated outflows
- Largest negative cumulative cash position before collection (CU at date) — purchase, payroll, freight and receipt dates
Contribution and cash gap answer different questions. Do not treat invoice revenue as cash received or divide one order’s fixed setup across unsupported future volume.
Fictional wholesale order and timing map
A 100-unit order is quoted in neutral tax-excluded currency units.
| Case | Declared inputs | Substitution | Result |
|---|---|---|---|
| Order contribution | 100 units × 60 price; 3,500 product cost; 450 handling/freight; 250 sales/credit allowance | 6,000 - 3,500 - 450 - 250 | 1,800 CU contribution |
| Contribution per unit | 1,800 order contribution; 100 shipped units | 1,800 ÷ 100 | 18 CU/unit |
| Pre-receipt cash gap | 3,500 product at day 0; 450 at day 14; customer 6,000 at day 45 | Peak outflows before receipt = 3,500 + 450 | 3,950 CU gap |
Stress-test the uncertain inputs
| Variable | Lower case | Higher case | What it tests |
|---|---|---|---|
| Trade discount | Smaller discount | Larger discount | Tests unit contribution and reseller room |
| Order volume | Below setup-efficient volume | Capacity-step volume | Tests absorption and step costs |
| Receipt date | Earlier dated receipt | Later dated receipt | Tests funding exposure independently of profit |
Stop and review when
- The trade price and cost stack use different tax or freight bases. (not complete)
- Capacity or minimum production/purchase commitments are omitted. (not complete)
- The customer receipt date is assumed to equal the invoice date. (not complete)
Turn the scenario into a controlled decision
- Reconcile the baseline to current records and name the evidence owner.
- Run the base case, then change one uncertain input at a time.
- Record the chosen response, approval limit, review date and stop trigger.
- Compare actual results with the original boundary before reusing the assumption.
Avoid these mistakes
- Treating a percentage discount as the whole wholesale economic model. (not complete)
- Calling profitable volume cash-generative without a dated cash map. (not complete)
- Embedding an unsupported distributor or retailer margin target. (not complete)
Questions to resolve before approval
- What is a good wholesale discount?
- There is no universal rate. Work backwards from the current cost stack, required contribution, counterpart economics and capacity under explicit terms.
- Can a profitable wholesale order create a cash shortage?
- Yes. Purchase, production, handling and freight may be paid before customer cash arrives.
Methodology and source boundary
- Wholesale Order Profitability methodology — Margin101: Product-owned order contribution and terms boundary.
- Wholesale vs Retail Channel Margin methodology — Margin101: Product-owned channel-price and margin allocation boundary.
- Inventory Funding Gap methodology — Margin101: Product-owned dated stock-cash boundary.