Interestingly I had a friend who had a business in the bulk flour business. They were moving enough stock but profits weren't coming through. We did some anal

Interestingly I had a friend who had a business in the bulk flour business. They were moving enough stock but profits weren't coming through. We did some analysis on cashflow and stock and found that the sitting costs of too much flour were eating cashflow. Basically he was paying upfront for bulk flour and then receiving the cash from customers over 60 and 90 days. One of the costs of holding too much inventory is real estate - bulk flour costs floorspace to store. In a low-margin business, just a few percent here and there can turn something from profitable to loss making pretty easy. That's not really applicable to software, which is generally a high margin business, but having too much inventory is definitely a problem. It's not about reducing or increasing revenue, it's about trimming down the size of the balance sheet.