---
title: "Boss, Why Is Your Capital Turnover Getting Slower and Your Cash Flow Shrinking?"
description: "Economic transformation and the unique characteristics of China's market economy have shaped Chinese distributors. As the market develops further, many manufacturers directly participate in and control distribution channels, manage terminals, and promote channel flattening, while the rapid rise of large supermarkets and hypermarkets has made distributors' positions increasingly awkward. Channel reform is moving toward deep distribution and modern logistics, and the glory of distributors is heading toward differentiation or decline. \"Profit margins are getting thinner; we've become high-level movers for manufacturers,\" \"Entry barriers for large supermarkets are rising, costs are increasing, and settlement is getting harder,\" and \"Capital turnover is slowing down and cash flow is shrinking\" have become common complaints among distributors."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-08-28"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/P__xk52zwDYOdaAjXeX6Xg"
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# Boss, Why Is Your Capital Turnover Getting Slower and Your Cash Flow Shrinking?

> Economic transformation and the unique characteristics of China's market economy have shaped Chinese distributors. As the market develops further, many manufacturers directly participate in and control distribution channels, manage terminals, and promote channel flattening, while the rapid rise of large supermarkets and hypermarkets has made distributors' positions increasingly awkward. Channel reform is moving toward deep distribution and modern logistics, and the glory of distributors is heading toward differentiation or decline. "Profit margins are getting thinner; we've become high-level movers for manufacturers," "Entry barriers for large supermarkets are rising, costs are increasing, and settlement is getting harder," and "Capital turnover is slowing down and cash flow is shrinking" have become common complaints among distributors.

Economic transformation and the unique characteristics of China's market economy have shaped Chinese distributors. As the market develops further, many manufacturers directly participate in and control distribution channels, manage terminals, and promote channel flattening, while the rapid rise of large supermarkets and hypermarkets has made distributors' positions increasingly awkward. Channel reform is moving toward deep distribution and modern logistics, and the glory of distributors is heading toward differentiation or decline. "Profit margins are getting thinner; we've become high-level movers for manufacturers," "Entry barriers for large supermarkets are rising, costs are increasing, and settlement is getting harder," and "Capital turnover is slowing down and cash flow is shrinking" have become common complaints among distributors.

What factors limit distributors' cash turnover?

1. **Mistakes in selecting distribution products, leading to promotion failure or slow sales:** Since most distributors are privately or partnership operated, management is often at the initial stage of family management or感性 decision-making. When selecting distribution brands, decisions are made based on feelings, relationships, or gut instinct, greatly increasing the likelihood of brand failure and slow sales. Each selection mistake can cause unimaginable economic losses and capital occupation.

2. **Rising proportion of bad debts and doubtful accounts:** Most distributors lack strict and standardized account management norms and financial analysis systems. Due to the absence of a complete customer management system, standardized financial analysis, and effective measures for collecting payments, distributors' receivables, doubtful accounts, and dead accounts far exceed normal enterprise standards, resulting in capital turnover difficulties.

3. **Extended settlement periods for retail terminals:** The rapid rise of large supermarkets, hypermarkets, and commercial chains has made their retail sales account for an absolutely high proportion, greatly enhancing the negotiating initiative of retail terminals. Coupled with the trend of manufacturers promoting products through "occupying terminals, winning terminals," distributors face pressure from manufacturers' deep distribution and terminal construction, and have to accept the harsh entry, display, and settlement policies imposed by dominant retail terminals. The vast majority of retail terminals settle payments with distributors in 45–60 days or more, and this is only possible with good relationships and strong public relations capabilities. Many distributors face the dilemma of not wanting to deal with large stores but having to, and many distributors' cash flow is burdened by large terminals.

How can distributors break through the capital dilemma?

Mistakes in brand selection, rising bad debt and dead account rates, and long settlement periods for downstream customers have become the three main factors causing distributors' capital turnover and cash flow difficulties. To break through the operational difficulties caused by capital pressure, improvements must be made in areas such as brand selection and standardized management:

1. **Establish a reasonable and scientific product selection evaluation process, and eliminate decisions based on feelings or gut instinct.** Based on analysis of industry development trends and assessment of one's own resources, formulate a rigorous development plan and product introduction plan. When introducing products, fully investigate and evaluate their development prospects to reduce product introduction mistakes.

2. **Adopt enterprise-style management.** Standardize and enhance your own operational management capabilities, reduce loopholes in operations, and make capital turnover and cash flow move toward a virtuous cycle. "When dealing with manufacturers, first you do business, and second you learn from them—learn how they develop markets, manage people, manage goods, and manage money."

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