COGS, inventory, and working capital forecast
Revenue growth can look healthy while cash gets tight because inventory and supplier payment timing absorb cash. A COGS, inventory, and working capital forecast connects gross margin assumptions to inventory purchases, accounts payable, and cash flow.
How do I forecast COGS and inventory together?
Start with revenue, gross margin, and cost of goods sold. Then decide whether purchases happen before sales, in the same month, or after demand is confirmed. Add supplier payment lag so AP and cash outflow do not collapse into the same period by accident.
1) Keep gross margin and cash timing separate
COGS affects the PL. Inventory purchases and supplier payments affect BS and CF timing. If you only forecast gross margin, you may miss inventory build and AP movement that change cash runway.
2) Review working capital balances
Inventory, accounts receivable, and accounts payable are the main operating working capital lines for many businesses. Each can make a profitable month feel cash-negative or a low-profit month feel cash-positive.
3) Use checks before sharing output
Before exporting, review whether inventory movement, payable timing, and ending cash tell the same story as your operational assumptions. If the balance sheet does not balance, check sign direction and timing before changing the model structure.