Stock order funding calculator

Q: Why does sell-through matter more than the order size?

Because only the stock that actually sells turns into revenue. A large order at a great margin still loses money if half of it sits unsold. Sell-through is the assumption that most often goes wrong, so base it on real history and lean conservative — the unsold remainder is cash you've spent that hasn't come back.

4 min read

Funding needWhat to finance

Projected profitWhat it returns

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What this calculator does

Buying stock is the classic short-term funding need — pay the supplier now, recover the cash as it sells over the following weeks. This calculator sizes that gap and tests whether the order is worth financing. You enter the order cost, the expected sell-through, your margin and the weeks to sell, and it returns the funding the order needs and the projected profit once it's cleared.

It's built for UK limited companies — retailers, wholesalers, e-commerce sellers — deciding whether to place a larger order, take a bulk-buy discount, or stock up for a known peak. The question it answers isn't just "can I afford the order" but "does this order generate enough profit, soon enough, to justify the cash it locks up".

How to use it

Four inputs, taken from the order and your own trading history:

Order cost — the total you'll pay the supplier, net of VAT.
Expected sell-through — the percentage of the order you realistically expect to sell, based on past performance. Be honest; optimistic sell-through is how stock becomes a write-off.
Margin — your gross margin on these goods (use the gross margin calculator if you're unsure).
Weeks to sell — how long the stock takes to clear, which sets how long your cash is tied up.

The result shows the funding need and the projected profit. A high margin and fast sell-through make an order easy to justify; a thin margin and slow turnover should give you pause.

How to read the result

The funding need is the cash you must find to place the order before any of it sells — the gap a short-term facility would bridge. The projected profit is what the order should return once your expected proportion sells through at your margin.

Read them together with the weeks to sell. An order that returns £4,000 profit is excellent if it clears in four weeks and mediocre if it takes nine months, because slow stock locks up cash that can't be used for anything else. The sell-through assumption is the one that bites: a 90% sell-through and a 60% sell-through on the same order produce very different outcomes, and unsold stock at the end isn't profit — it's cash sitting on a shelf. If the projected profit comfortably exceeds the cost of financing the order, and the stock turns quickly, it's a sound use of a short-term facility.

The formula in plain English

The chain runs from order to profit:

Funding need = order cost (the full amount you pay upfront, before any sales)

Expected sales value = (order cost × sell-through %) ÷ (1 − margin %)

Projected profit = expected sales value − (order cost × sell-through %) − value of unsold stock written off

Put simply: of the stock you buy, only the portion that sells generates revenue, and only the margin on that revenue is profit. The unsold remainder is cash you spent that hasn't come back. The weeks-to-sell figure then tells you how long your funding is committed — which is what determines the cost of borrowing against the order, and whether a quick-turning line justifies financing.

Worked example

A retailer places a £10,000 order, expects 85% sell-through at a 50% margin, clearing over 8 weeks.

Stock sold = £10,000 × 85% = £8,500 at cost. At a 50% margin that £8,500 of cost sells for £17,000, giving £8,500 of gross profit on the sold portion. But £1,500 of stock (the unsold 15%) is cash that hasn't returned, so net profit is roughly £8,500 − £1,500 = £7,000 on a £10,000 outlay, recovered within two months. Even after financing costs, that's a strong order. Drop sell-through to 60% and the picture weakens sharply. Figures are illustrative.

Limitations to keep in mind

Everything hinges on the sell-through estimate, and stock has a way of selling slower than hoped — a quiet season, a fashion that moves on, a competitor's price cut. Use conservative sell-through from real history, not a best case, and remember unsold stock isn't just lost profit; it's cash and storage tied up indefinitely.

The tool sizes one order in isolation; it doesn't see your wider cash position or other commitments. Check the order fits your overall liquidity with the working capital calculator, confirm the return justifies the borrowing with the return on borrowing calculator, and price any facility with the true cost of borrowing calculator. Financing stock against a confirmed, fast-selling line is sound; financing speculative stock is how businesses get stuck. This is general information, not financial advice.

Frequently asked questions

Why does sell-through matter more than the order size?

Because only the stock that actually sells turns into revenue. A large order at a great margin still loses money if half of it sits unsold. Sell-through is the assumption that most often goes wrong, so base it on real history and lean conservative — the unsold remainder is cash you've spent that hasn't come back.

Should I finance stock or pay for it from cash?

If the order turns quickly at a healthy margin, financing it can make sense — you keep your own cash free for other needs and the profit easily covers the borrowing cost. If margins are thin or the stock is slow-moving, financing magnifies the risk. The test is whether projected profit comfortably exceeds the financing cost, and whether the stock clears fast.

What kind of finance suits a stock order?

A short-term, flexible facility usually fits best, because the need is temporary — you draw to pay the supplier and repay as the stock sells. A revolving credit facility lets you draw and repay as orders cycle, rather than taking a fixed loan for a one-off purchase. Match the borrowing's shape to the stock's selling cycle.