The Cash Cycle Explained: How Money Really Moves in Kenyan Agri Supply Chains

This is the basic rhythm of agribusiness. But have you ever mapped out how long your money is actually tied up between spending and earning?

That’s where the cash cycle comes in — a simple but powerful way to understand the financial heartbeat of your business. It’s not just about how much you earn, but when the money arrives and whether it’s in your hands when you need it.

What Is a Cash Cycle — and Why It Matters

The cash cycle is the number of days between when you spend money (buying stock, inputs, paying workers) and when you get paid for the goods or services you provided.

A longer cycle means your money is tied up for longer, and you need more cash on hand to keep operating. A shorter cycle means money returns faster, and you can keep things moving more easily. Understanding your cash cycle helps you:

• Plan ahead and avoid surprises

• Identify cash gaps before they become crises

• Decide when and how to restock, deliver, and invest in growth

A Simple Example from a Kenyan Agri-SME

Let’s say you run a groundnut processing business.

• Days 1–3: You buy groundnuts from farmers and pay them in cash

• Days 4–7: You dry, sort, pack, and transport the product

• Day 8: You deliver to your buyer

• Day 9–38: Your buyer is on 30-day payment terms

• Day 39: You finally receive payment

That’s a 38-day cash cycle. For 38 days, your money is locked, even though your business is active, your stock is moving, and your operations are solid. If you need to restock before Day 39, you’ll need cash from somewhere else.

This is the reality for many agri-SMEs: you’re not losing money, you’re waiting for it.

How to Understand and Calculate Your Cash Flow: A Step-by-Step Guide

To manage your cash cycle, you need to understand how cash actually moves through your business. Here’s how to get started:

Step 1: List All Your Cash Outflows (Spending)

Write down regular business expenses and when they occur:

• Stock purchases

• Transport and packaging

• Casual labour or salaries

• Fuel, inputs, rent, licenses

Step 2: List All Your Cash Inflows (Earnings)

Track every source of income and when it arrives:

• Buyer payments (and their actual payment terms)

• Side sales or other income

• Repayments from customers

Step 3: Map the Timing

Put this into a weekly or monthly calendar. When do you pay out money? When does it come in?

You’ll start to see patterns, especially where cash goes out before it comes back.

Step 4: Calculate Your Cash Flow

Each week or month, subtract cash outflows from inflows:

Cash Flow = Cash In – Cash Out

Positive? You have breathing room.

Negative? You’re operating at a cash shortage.

Step 5: Spot Pressure Points

Look at:

• Which weeks are tight?

• Which customers delay payment the most?

• Are you restocking before you get paid?

Once you know where pressure builds, you can plan around it.

Where Most Agri-SMEs Get Stuck

The most common challenges are:

• Buyers are delaying payment beyond the agreed terms. Invoice terms say 30 days, but they pay in 45 days.

• Stock purchased in bulk too early, tying up funds. Money is in the store, not your pocket!

• Operational delays (logistics, storage, processing) that postpone delivery and invoicing

Each of these stretches the cash cycle, and that makes it harder to meet daily needs or seize growth opportunities.

How to Improve Your Cash Cycle

Even small adjustments can reduce stress and give you more control:

• Deliver earlier to start the invoice clock sooner

• Keep stock levels realistic and liquid

• Track real payment behavior, not just invoice dates

• Where trust exists, negotiate tighter payment terms

• Use financing as a short-term bridge when needed, not a permanent solution

Using the Right Support to Close the Gaps

When the delay between delivery and payment stretches your operations, financing can help fill the gap, especially when timed to your cash cycle.

At Avenews, we offer financing options that align with your cash flow, including:

• Supplier Financing (advance on pending buyer payments)

• Buyer Financing (pay suppliers now, repay later)

• Agri Credit Line (for input and stock purchases)

These solutions help you stay active without waiting helplessly for payment.

Closing Thought

Understanding your cash cycle gives you more than just numbers, it gives you control. When you know where money slows down or how your money moves, you can make better decisions, avoid unnecessary pressure, and keep your business running on rhythm instead of guesswork.

Because in agribusiness, cash may be king, but timing is everything.