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Start with the actual resale/payment trigger
The U.S. Commercial Service’s Trade Finance Guide describes consignment as payment to the exporter after the foreign distributor sells to an end-customer, and discusses funding the waiting period. That commercial description is not proof of legal title, creditor protection or eligibility for U.S. export-finance programmes.
For your proposal, specify what evidence of a resale triggers the supplier’s payment, how much is remitted, when it is due and what happens to stock that does not sell. Those facts must come from the actual arrangement.
A US$26,000 start can take several months to recover
Fictional supplier example, all amounts in U.S. dollars: 100 units cost US$240 each to acquire, and shipping costs US$2,000. Both are paid before the stock reaches the distributor. Assume the supplier receives US$400 for each unit resold, with the following payments actually arriving at month-end.
| Event | Supplier cash movement | Cumulative cash |
|---|---|---|
| Acquire 100 units and ship them | −26,000 | −26,000 |
| Month 1: 20 units sold and paid | + 8,000 | −18,000 |
| Month 2: 30 units sold and paid | + 12,000 | −6,000 |
| Month 3: 10 units sold and paid | + 4,000 | −2,000 |
The negative cash figure is not the whole result
After month 3, 60 units have sold and 40 remain. Those 40 originally cost US$9,600 to acquire. The US$2,000 cumulative cash shortfall is therefore not a complete accounting loss: the calculation also has unsold stock whose condition, recoverability and future sale are not established. Equally, that stock is not cash available for the next payroll.
Add any storage, insurance, returns, further shipping, technical support and financing costs that the real arrangement puts on the supplier. If a resale occurs but the distributor pays late, use the actual expected receipt date rather than counting the sale as cash.
Set a stock commitment the parent can carry
Ask management for a stock register, supported demand evidence, payment reporting, a realistic unsold-stock plan and the cash dates. Test slower resale and returns before committing additional batches. A credible distributor can still leave too much parent cash tied up.
Keep this dated stock ledger beside the wider monthly Cash runway model. The tool is not a consignment stock register or a day-by-day collection system. Do not deduct the same purchase again when a previously paid-for unit sells. Legal rights against a distributor or its creditors need a separate review of the actual facts.
Scope
- The units, costs, payments and dates are fictional. No legal ownership, security priority, accounting policy, customer demand, insurance coverage or financing availability is established.
Next step
Agree the resale/payment evidence and a funded stock limit. Keep a separate inventory/payment ledger and use the existing cash tool only for the wider monthly cash picture.
Sources & review notes
U.S. Department of Commerce — International Trade Administration
Passage, dates and research notes
official-guidance · Consignment chapter: payment after resale and financing the period before payment
Scoped commercial explanation only. No legal title/creditor protection, financing approval or eligibility for U.S. export programmes is established.
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