---
title: "Why Do Distributors with Annual Transaction Volume of Tens of Millions Still Lack Money?"
description: "This morning, while chatting with a manufacturer's salesperson, I asked if their products were entering the peak season as the year-end approached. The salesperson replied with just seven words: \"Distributors all lack money.\" As year-end approaches, manufacturers introduce attractive promotional policies, especially in November when major brands start new rounds of inventory pressure, hoping to recover more cash from distributors. Consequently, some distributors give all their money to manufacturers to meet year-end tasks. For distributors, regardless of size or financial strength, they always feel short of funds because they must pay upfront for goods, while large supermarkets and chain stores often use credit sales and long payment terms, tying up large amounts of capital and burdening later operations. Thus, at the year-end peak season, distributors often face cash shortages as manufacturers come to collect payments, and if terminal customers delay payments, it severely impacts the cash flow."
author: "李青林"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-11-10"
language: "en"
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# Why Do Distributors with Annual Transaction Volume of Tens of Millions Still Lack Money?

> This morning, while chatting with a manufacturer's salesperson, I asked if their products were entering the peak season as the year-end approached. The salesperson replied with just seven words: "Distributors all lack money." As year-end approaches, manufacturers introduce attractive promotional policies, especially in November when major brands start new rounds of inventory pressure, hoping to recover more cash from distributors. Consequently, some distributors give all their money to manufacturers to meet year-end tasks. For distributors, regardless of size or financial strength, they always feel short of funds because they must pay upfront for goods, while large supermarkets and chain stores often use credit sales and long payment terms, tying up large amounts of capital and burdening later operations. Thus, at the year-end peak season, distributors often face cash shortages as manufacturers come to collect payments, and if terminal customers delay payments, it severely impacts the cash flow.

> This morning, while chatting with a manufacturer's salesperson,
>
> I asked him, as the year-end approaches, your products should be in the peak season, right?
>
> The salesperson replied with just seven words: "Distributors all lack money."

We all know that as the year-end approaches, major manufacturers have successively introduced some attractive promotional policies, especially in November when a new round of inventory pressure from big brands has begun. Manufacturers hope to recover more cash from distributors. Therefore, some distributors, in order to complete the year-end tasks set by manufacturers, give all their money to the manufacturers.

For distributors, regardless of their strength or whether their funds are sufficient, at any time, they will feel that their funds are in short supply. This is because distributors cooperate with manufacturers on a cash-before-goods basis, and currently, large supermarkets, medium-sized supermarkets, or chain supermarkets commonly use credit sales and long payment terms, which leads to a large amount of capital being occupied, bringing a burden to the later operations of distributors. Therefore, at the year-end peak season, distributors will experience capital shortages because major manufacturers come to collect payments. At this time, if terminal customers fail to pay back, it will seriously affect the cash flow of distributors.

**Inventory counting is very important**

Some distributors, when encountering products that sell well, purchase in large quantities without ever checking their inventory, resulting in a large amount of capital being occupied, and even causing goods to pile up, resulting in losses.

Therefore, distributors should set up their own safety stock, which is generally 1.5 to 2 times the monthly task volume. This can ensure no stockouts during the peak season and also prevent a large amount of capital from being occupied.

**Dare to say "no" to manufacturers**

As the year-end approaches, manufacturers, in order to sprint to the finish line and prepare for a good start in the new year, will ask distributors to stock up heavily. Some distributors, out of respect for the manufacturers, have to stock up heavily, even though this far exceeds their own digestion capacity. Therefore, distributors should dare to say no to manufacturers. One of my former distributors was like this; the goods stocked at the end of the year were not sold until June of the following year.

**Make a stocking plan in advance**

I believe most distributors can predict the sales situation at the end of the year based on the previous year's sales. At this time, distributors should make plans in advance and reserve reserve funds, which can reduce capital shortages.

**Timely product line cleanup**

Every distributor hopes to use idle funds to create more profits for themselves. Therefore, when funds are idle during the off-season, they will consider taking on a new product to create more profits. This can easily lead to the diversion and occupation of funds due to too many products being distributed.

Category cleanup is to highlight the main selling products. For main selling products, it is recommended that distributors declare and plan based on 80% of their estimate; for non-main selling products, plan at 40% of normal sales to avoid overstocking.

Therefore, it is not recommended for distributors to take on new products at the end of the year. If they must, they should be cautious, and they should not be soft when it comes to cutting categories that should be cut. Although the relationship with the manufacturer is good, business is your own, and the two must be clearly distinguished.

**Timely recovery of debts**

For overdue debts from terminals, recovery efforts should be strengthened, and credit sales should be cautious. It is better to deliver goods more often and do less business than to easily sell on credit. Because you may be trustworthy, but that does not mean all terminal bosses are trustworthy. A few defaulters can make your entire peak season profits go down the drain. Supply to supermarkets should also be cautious. There are supermarkets that are unwilling to occupy warehouse space, and there are also those that like to occupy warehouse space to use others' funds for their own benefit, especially during the peak season. For bad debts and dead accounts, do not easily give up; recover as much as possible.

**Learn to "ask for money" from terminals**

Distributors have several best-selling products in hand, so they can use year-end promotions to first collect money from terminal customers, but the goods should be provided in batches and stages. This can prevent secondary wholesalers from cross-selling and price undercutting, thereby better controlling the market.

In an era where cash is king, as a distributor, how to manage your cash flow is very important. Cash flow is the blood of a distributor's development. Therefore, we must proceed from the overall situation to better obtain profits.

**Source: Frozen Food Distributor**


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