Calculating Cash Conversion Cycle Metrics in Commercial Distribution
Calculating cash conversion cycle metrics requires grounding inventory, receivable, and payable days in landed costs and ledger adjustments to protect liquidity.
Stop Supply Protocol
Meaning
A formalized set of emergency procedures governs the immediate suspension of goods or services to a customer whose account has breached specific credit or safety thresholds. Credit controllers implement a stop supply protocol to limit financial exposure when a buyer fails to pay outstanding invoices within the agreed timeframe. This protocol defines the exact steps for notifying the customer and updating the order fulfillment system.
It serves as a defensive measure to prevent further losses when a business relationship becomes unstable.
Trigger Condition
Specific metrics determine when the suspension of deliveries must occur. Reaching a pre defined limit on an account governed by the stop supply protocol automatically puts the balance on hold. This happens instantly.
Notification Flow
Communication with the affected party follows a structured timeline to minimize confusion and legal risk. The stop supply protocol requires an immediate formal notice to be sent to the customer detailing the reason for the hold. At the same time, internal departments such as sales and logistics are alerted to prevent any new orders from being processed or shipped.
Information flows quickly.
Resolution Path
Criteria for resuming the service are clearly outlined to ensure a consistent approach to debt recovery. Once the customer satisfies the requirements of the stop supply protocol, such as paying the overdue balance or providing a bank guarantee, the hold is lifted. This ensures that the flow of goods only resumes when the financial risk has been mitigated.
Recovery is the objective.