A Lusaka distributor closes the month with a profit, then struggles to pay its suppliers. Its customers have received their orders, but their invoices are still outstanding. Meanwhile, the distributor has already paid for replacement stock. The sales earned a margin, but the cash from those sales will arrive after some of the bills fall due.

Follow the cash through a wholesale order

The distributor buys stock ahead of demand. Paying the supplier reduces its bank balance immediately, while unsold stock remains in inventory. When the distributor delivers part of that stock on credit, it records the sale and the cost of the goods sold. The margin appears in the accounts, and the customer’s unpaid invoice sits in trade receivables.

Before the customer pays, a supplier invoice and payroll fall due. The distributor also has slow-moving stock on the shelves, so cash committed to those goods is still tied up. If the customer pays late, the funding gap lasts longer. A forecast based on expected collection dates would have shown the shortfall before the business placed its next stock order.

Put VAT on the cash forecast

The Zambia Revenue Authority’s VAT guide explains that registered businesses generally account for VAT on an invoice basis, with cash accounting available where the law provides relief. For a distributor on the invoice basis, VAT on a credit sale can fall due before the customer pays. Include the expected net VAT payment in the cash forecast using the applicable filing and payment timetable. Zambia Revenue Authority VAT Guide

Use the forecast to make decisions early

Start with the bank balance and map expected receipts against supplier payments, payroll and tax due dates. Use customers’ actual payment patterns to estimate collections, and follow up disputed invoices before they become overdue. Review slow-moving stock before approving replenishment and test how a late payment from a major customer would affect the balance. That gives the team time to adjust purchasing or agree workable supplier terms before obligations fall due.

M&J Africa can help you build a cash-flow forecast from your sales, inventory and payment records so you can see funding gaps earlier and make better purchasing and credit decisions. Get in touch to discuss your working capital needs and enquire for a tailored quote.