Methodology
Inventory Funding Gap Planner methodology
Educational only: Business decision support, not accounting, tax or legal advice.
Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.
Update policy: Reviewed when formulas or official dependencies change.
Scope: Market-neutral small-business planning using your own assumptions.
1. Formulas and units
netCashFlow = customerCollections − supplierPayments − logisticsAndOtherOutflowsWhere
- supplierPayments
- Supplier payments (currency units)Source: User assumption
- logisticsAndOtherOutflows
- Logistics and other inventory cash outflows (currency units)Source: User assumption
- customerCollections
- Customer collections (currency units)Source: User assumption
- netCashFlow
- Event net cash flow (currency units)Source: Calculated output
cumulativeFundingPosition = priorCumulativeFundingPosition + netCashFlowWhere
- netCashFlow
- Event net cash flow (currency units)Source: Calculated output
- cumulativeFundingPosition
- Cumulative funding position (currency units)Source: Calculated output
fundingGap = max(0, −cumulativeFundingPosition)Where
- cumulativeFundingPosition
- Cumulative funding position (currency units)Source: Calculated output
- fundingGap
- Event funding gap (currency units)Source: Calculated output
peakFundingGap = max(fundingGap)Where
- fundingGap
- Event funding gap (currency units)Source: Calculated output
- peakFundingGap
- Peak funding gap (currency units)Source: Calculated output
firstFundingGapDate = first(date where fundingGap > 0)Where
- date
- Event date (ISO calendar date)Source: User assumption
- fundingGap
- Event funding gap (currency units)Source: Calculated output
- firstFundingGapDate
- First funding-gap date (ISO date or not reached)Source: Calculated output
peakFundingGapDate = first(date where fundingGap = peakFundingGap)Where
- date
- Event date (ISO calendar date)Source: User assumption
- fundingGap
- Event funding gap (currency units)Source: Calculated output
- peakFundingGap
- Peak funding gap (currency units)Source: Calculated output
- firstFundingGapDate
- First funding-gap date (ISO date or not reached)Source: Calculated output
- peakFundingGapDate
- Peak funding-gap date (ISO date or not reached)Source: Calculated output
firstRecoveryDate = first date after the peak where cumulativeFundingPosition ≥ 0Where
- date
- Event date (ISO calendar date)Source: User assumption
- cumulativeFundingPosition
- Cumulative funding position (currency units)Source: Calculated output
- firstRecoveryDate
- First recovery date after peak (ISO date or not reached)Source: Calculated output
closingFundingPosition = cumulativeFundingPosition on the final entered eventWhere
- cumulativeFundingPosition
- Cumulative funding position (currency units)Source: Calculated output
- closingFundingPosition
- Closing funding position (currency units)Source: Calculated output
Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.
2. Worked example
Input assumptions
The worked rows below come directly from the registered engine and visible default fixture.
Calculation and outputs
Example
The worked rows below come directly from the registered engine and visible default fixture.
- 2026-01-31 net cash flow
- -700 currency units
- 2026-01-31 cumulative funding position
- -700 currency units
- 2026-01-31 funding gap
- 700 currency units
- 2026-02-28 net cash flow
- -100 currency units
- 2026-02-28 cumulative funding position
- -800 currency units
- 2026-02-28 funding gap
- 800 currency units
- 2026-03-31 net cash flow
- 900 currency units
- 2026-03-31 cumulative funding position
- 100 currency units
- 2026-03-31 funding gap
- 0 currency units
- Peak inventory funding gap
- 800 currency units
- First funding-gap date
- 2026-01-31
- Peak funding-gap date
- 2026-02-28
- First recovery date after peak
- 2026-03-31
- Closing funding position
- 100 currency units
The exact engine-derived outputs are shown in the labelled rows below.
Interpretation
The result rolls only the dated cash events you enter; it does not forecast sales, collections or supplier behaviour.
3. Validation and boundary checks
- The collection must contain between 1 and 60 uniquely identified cash events.
- Dates must be real ISO calendar dates, unique and strictly chronological.
- Supplier payments, logistics outflows and customer collections must be finite and non-negative.
- Recovery is reported only after the peak gap and only when the cumulative position returns to zero or above.
4. Assumptions and source classification
- All balances, rates, timing and coverage thresholds are user-supplied records or explicit assumptions.
- No lender covenant, market rate, policy threshold or future cash flow is inferred.
- Supplier payments, inventory cash outflows and customer collections are explicit user-entered scenarios.
- Dates must be real, unique and strictly chronological; no collection or demand timing is forecast.
This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.
5. Limitations
- The model excludes lender fees, taxes, covenant definitions and lender-specific credit assessments.
- It does not replace accounting, tax, legal or financial advice.
This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.
6. Update and evidence policy
Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.
Change history
- : Initial public release of the Inventory Funding Gap planner and methodology.
Related reading
Guides to interpret the decision and its assumptions.
- How Much Working Capital Does Growth Consume?
Reconcile signed receivables, inventory and payables changes to show scenario cash absorbed at a stated balance date.
Read guide - Why Inventory Growth Can Create a Cash Crisis
Map supplier payment, stock commitment, sell-through and customer receipt dates to expose the inventory funding gap.
Read guide