The discount looks sensible
Your winter shop needs stock, and its demand model predicts 100 sales this month. Ordering the whole forecast earns a lower unit price, so the owner expects the better deal to be the safer decision.
In this hypothetical example, assume zero starting stock, $1,000 cash, and a $20 selling price. The supplier charges $8 each for 100 units or $10 each for smaller orders, including delivery, payable upfront. Smaller orders arrive before customer deadlines. The owner needs $1,500 at month end for bills.
Run the same slow month twice
Test an illustrative month with only 60 completed purchases. All sales receipts clear before the bills; assume no other cash movements.
Bulk buying costs 100 × $8 = $800. Receipts are 60 × $20 = $1,200, leaving $1,000 − $800 + $1,200 = $1,400 cash: $100 short.
Staged buying starts with 60 units: 60 × $10 = $600. With no reorder, cash becomes $1,000 − $600 + $1,200 = $1,600, preserving $100 above the bill requirement.
The missing money is still on the shelf
Bulk buying produces $1,200 − (60 × $8) = $720 gross margin, versus $600 from staged buying. Yet its remaining 40 units hold $320 at purchase cost. Buying stock spends cash immediately; gross margin deducts only the cost of units sold. Neither margin figure is net profit.
Make the payment date the test
Inspect the purchase quantity, supplier payment date, completed sales and receipt settlement dates. Recalculate cash available before bills fall due. If it drops below $1,500, reduce or defer the order; a demand forecast alone cannot authorize spending. Under these assumptions, choose staged buying.
Now change the example to a firm backlog of 100 orders, all delivered and paid this month. Bulk buying leaves $1,000 + $2,000 − $800 = $2,200; smaller orders leave $1,000 + $2,000 − $1,000 = $2,000. Both cover bills, so choose bulk. Recheck when quantities or payment dates change.