When you sell a product on Amazon it’s important to have a clear understanding of your sales time and how this changes. This metric will be affected by factors like seasonality, ads, pricing and competitors.

This becomes critical as you scale up sales and will increase your cash demands. A key component of your cash flow forecast is the cash cycle, the time from cash outlay from your bank to cash back into your bank after the sale. There are a number of components in this time period: manufacturing, freight, sale/platform and amazon payout time. All this should be added up. Working out the sale time on the Amazon platform is easier than you think. Here’s how you can do it:

Amazon has a metric it calls ‘Sell Through Rate’.

You can find this metric in the FBA inventory report. Navigate to ‘inventory’ > ‘FBA inventory’

Amazon Sell-through rate = Units sold (last 90 days) ÷ Average units on hand

We can take this number and reverse it to work out the average days to sell 1 unit = 90 ÷ Sell-through rate.

For product X in the above screenshot, it has a sell through rate of 4.739. Flipping this calculation we can say that it takes an average of 18.99 days to sell 1 unit (90/4.739). Essentially 2.7 weeks.

You can run this number for each of your products to understand the average time it takes to sell 1 unit on amazon over the last 90 days. Note that this also takes into account stockouts, because the metric divides the sell through rate by the total stock available.

Now we can calculate our cash cycle. Time from cash out of our bank to cash back into our bank. Here’s a worked example for a product we have running on FBA:

• Manufacturing time: 14 days
• Freight (shipping to amazon warehouses): 7 days
• Platform sales time: 19 days
• Amazon payout (the time it takes amazon to pay you the money on your sale): 14 days

Therefore the total cash flow cycle is 54 days 

No AI’s were used to write this content. I’m proud to say it was purely written by me.