China Sourcing Cash Flow & Working Capital Guide
When the books show profit but the bank is empty

Hello, this is GreenFrog Seoul.

"The unit price was right and the margin was healthy, but when it was time to place the next order, the bank account was empty."
"The products sell well, yet the cash in hand is always tight."
"The books show a profit — so why am I always chasing money?"

When you source from China, it's easy to focus only on unit price and margin and get caught off guard somewhere else entirely: the timing of money coming in and going out — your cash flow. Profit on the books and cash in the bank are not the same thing. You can sell goods at a clear profit and still have no cash for the next order, because that money is locked up in inventory and receivables. A business that's profitable yet collapses because the cash isn't moving — that's the trap of going insolvent while in the black, and it begins right here.

What takes sellers down in sourcing isn't a loss — it's cash flow. People spend days squeezing 1% off the unit price, yet never map out how the order amount stays locked up in inventory for months. Before the price negotiation comes a cash calendar: a note of when your money leaves and when it comes back.

Today we'll cover where and how long your money gets tied up from order to collecting the sales proceeds, how deposit/balance terms work on cash, when the freight, duty and import VAT beyond the goods cost get pulled out, why inventory is locked-up cash, and how to ride out a tight cycle. Draw a cash calendar once, and the mystery of "the goods move well, so why am I always strapped" comes into focus.

1. Insolvent While Profitable — Profit and Cash Aren't the Same

First, clear up one misconception. Many sellers assume that as long as the margin is enough, the cash will take care of itself. Reality differs. Profit is a number on the books; cash is the money actually sitting in your account. The two are out of sync in time. Even after you sell goods at a profit, if that money is still stacked up as inventory or locked in a customer's receivable, the bank account is empty.

A sourcing business is built so that money goes out first and comes in later. You pay the factory a deposit, then the balance, then freight and duty — and only then do the goods reach you. Collecting the proceeds from selling all of it takes a while longer. The money leaving goes out all at once the moment you order, while the money coming in trickles back at the pace of sales. The longer this gap, the drier your cash gets, even as the books show a profit.

2. Where Money Gets Tied Up — From Order to Collection

To get a grip on cash flow, start by mapping where and how much of your money gets locked up in a single order. From the moment you place the order to the moment its proceeds land back in your account, the money stays tied up the whole time. This stretch is often called the cycle in which your cash makes one full turn.

The broad flow goes like this. The deposit leaves with the order, and that money is locked while you wait for production. When production ends, the balance leaves, and freight and duty pile on while the goods sail to Korea. Even once the goods reach the warehouse, they aren't money yet. Only as each unit sells and the proceeds return does the locked money come free. In other words, from the day you pay the deposit to the day the last unit sells and you collect — often two or three months or more — your money sits trapped.

3. How Deposit/Balance Terms Affect Cash

Dealing with Chinese factories usually means paying a deposit first and the balance later — commonly something like 30% deposit, 70% balance before shipment. That ratio looks like a simple payment term, but it works on cash flow quite a bit. The higher the deposit, the earlier and larger your money leaves, and the longer it stays locked.

So when you negotiate terms, don't look at unit price alone. Lower the deposit even a little, or push the balance to just before shipment, and the same purchase keeps your money tied up for a shorter time. The effect is biggest when you tie it to inspection. Put "balance paid after inspection passes" in place, and the balance moves later while you also hold a quality card. Payment terms are a matter of price, but before that, they're a matter of when your cash drains.

4. Money Beyond the Goods — Freight, Duty, VAT

Here's a part sellers often miss when planning cash: counting outgoing money as the "goods cost" only. In reality, beyond the goods cost go freight, duty, and import VAT. These hit at the moment the goods arrive, so if you don't reckon them in advance, cash jams right before receiving.

Import VAT in particular is worth understanding. It's money you have to pay at customs, so cash drains at that point, but you later reclaim it through a VAT filing. It isn't a cost that vanishes for good, yet until you get it back, that much of your cash sits locked. Plan your cash too tightly around the goods cost, and at the customs stage freight, duty and VAT drain together and cash suddenly dries up. The money going out isn't a single goods cost but several streams that cluster at receiving — note them together in your cash calendar.

5. Inventory Is Locked-Up Cash

Treat the inventory stacked in your warehouse as an "asset" only, and you'll miss the cash flow. Inventory is indeed an asset, but it's also frozen cash that won't move. Until it sells, inventory turns into not a cent of cash while quietly eating storage costs. Lots of inventory means that much of your money is frozen in the warehouse.

Here's a trap sellers fall into easily: buying a lot at once to push the unit price lower. The per-unit price does drop, but in exchange more cash stays locked as inventory for longer. For a fast seller, turnover clears it quickly; misjudge the sales pace, though, and the burden of the locked cash outweighs the price you shaved. When you buy stock, look not only at "how much per unit" but also at "how many months until this turns back into cash." A deal that cuts the unit price while freezing cash can look like a gain on the books yet be poison for cash.

6. How to Ride Out a Tight Cash Cycle

A structure where money gets locked is close to the fate of a sourcing business. Even so, there are ways to shorten the lock-up and bridge the gap. The key is to smooth out the swing of money leaving all at once and returning all at once.

The most basic move is not to pile everything into one order but to split it. With split orders, the deposit and balance spread out, so the cash leaving at any one point shrinks and inventory builds up slowly. Adjusting terms to push the balance later does the same. It also helps to direct cash first to fast sellers whose sales pace supports them, and not to freeze cash in slow-turning stock. If needed, you can slot in outside funds such as trade finance or import financing to bridge the gap before collection. Either way, the starting point is one — you need a cash calendar noting when your money leaves and when it returns, so you can see where to adjust.

7. Cash Traps Sellers Fall Into

The losses that leak from cash flow also repeat through a few set mistakes. Gather the traps Korean sellers hit often and they look like this.

• Profit = cash illusion — looking at margin alone, missing the time lag in the bank balance
• Counting goods cost only — dropping the freight/duty/VAT that cluster at receiving
• Bulk order seduced by price — locked-cash burden exceeds the price shaved
• Ignoring the collection lag — not counting the slow return of sales proceeds
• Next order with no cash — over-ordering again before collection
• No cash calendar — never mapping when money leaves and returns

The common thread is clear. Most arise from treating cash as something that "turns on its own once there's a profit." Profit is the report card of a business; cash is its oxygen. The grades can be good, but cut off the oxygen and it stops. Before placing an order, open the cash calendar first and ask, "When does this money come back, and do I have cash to last until then?" — and most of these traps close.

8. GreenFrog Seoul's Cash Flow Support

The principle of cash flow sums up neatly, but on the ground, drawing a per-order cash calendar, negotiating terms in cash's favor, reckoning the timing of freight/duty/VAT, and smoothing the flow with split orders each take real work. On top of that, unit-price negotiation and cash strain are a seesaw — press one side and the other rises — so unless you watch both together, you can cut the price yet jam the cash. GreenFrog Seoul designs cash flow together — not just unit price, but payment terms, order splitting and receiving timing — so sellers don't fall into the going-bust-while-profitable trap.

Support services

What changes when we work together

• Visible cash flow — when money leaves and returns, at a glance
• A smoothed swing — split orders spread the cash strain of any one point
• Better terms — negotiate not just unit price but payment timing
• Oxygen to last — prepare in advance for the gap before collection

9. Cash Flow Checklist

Items to check stage by stage, from before ordering to collection.

Before ordering

• Reckoned this order's deposit, balance, freight, duty and VAT in full
• Drew a cash calendar of when this money leaves and returns
• Confirmed there's cash to last until collection

Order · payment stage

• Negotiated the deposit ratio and balance timing in cash's favor
• Weighed the option to split rather than order big at once
• Pushed the balance later with "balance after inspection passes"

Receiving · collection stage

• Prepared for freight/duty/VAT clustering at receiving
• Prioritized so cash isn't frozen in slow-turning stock
• Timed the next order by watching the pace of collection

Wrap-up — Draw the Cash Calendar Before the Unit Price

Compressing today into one line each:

• Profit ≠ cash: book profit and bank cash are out of sync in time
• The lock-up stretch: from deposit to collecting proceeds, your money is trapped
• Payment terms: negotiate on deposit/balance timing, not unit price alone
• Hidden costs: freight, duty and VAT drain together at receiving
• Inventory = cash: bulk ordering to cut price freezes cash in the warehouse

Cash flow doesn't stand out the way unit price or margin does. That's what makes it more dangerous. A loss warns you with red numbers on the books, but a cash jam strikes suddenly the moment the balance hits zero. A business that sold well, then one day can't place the next order, usually never drew its cash flow. The key is to draw the cash calendar before cutting the unit price — note in dates when your money leaves and returns, and the mystery of "the goods move well, so why am I always strapped" resolves, while the right time for the next order comes clear. Before your next order, pause and ask, "Do I have cash to last until this money returns?" That one check prevents the accident of stalling while in the black. GreenFrog Seoul designs cash flow together — from unit price to payment terms, order splitting and receiving timing — so Korean sellers can grow without being chased by money. If your cash flow is always tight, reach out anytime.