How Raw Materials, WIP, and Finished Goods Drain Liquidity

We’re making money—so why do I feel broke?

That’s the question I hear most often when a founder reaches out for help. They’ve got strong revenue, margin looks healthy, but the cash just isn’t there. It’s frustrating, and honestly, pretty common.

More often than not, the culprit is inventory. Not just finished goods collecting dust in a warehouse—but every stage of the inventory lifecycle. Cash gets trapped in raw materials, swallowed by work-in-progress (WIP), and quietly frozen in finished goods. And if you don’t have full visibility into how your inventory moves (or doesn’t), you can’t manage your liquidity—no matter how many units you’re selling.

At BBG, we help CPG and winery founders pinpoint exactly where cash is hiding in their operations. Once you know where your dollars are stuck, you can start unlocking them without jeopardizing production. Let’s walk through what that looks like at every stage: raw materials, WIP, and finished goods.

Raw Materials: Where the Cash Drain Begins

Most inventory issues start before you’ve even made a product. I’ve seen founders stockpile raw materials—bottles, labels, ingredients, custom pouches—months ahead of schedule. They do it to hit vendor minimums, take advantage of bulk discounts, or avoid last-minute production panic. The logic makes sense. But that strategy quietly siphons off liquidity long before revenue ever shows up.

Take the founder of a sparkling water brand I worked with last year. She ordered a full quarter’s worth of shrink-wrapped cans in anticipation of a big wholesale launch. But the retail partner delayed onboarding by six weeks. Those cans sat in a storage unit, her cash locked in aluminum instead of fueling growth.

It’s the same story in the wine world. I’ve worked with wineries that bought custom glass far in advance, only to delay bottling due to harvest timing or label revisions. That upfront spend means capital is tied up just sitting on a pallet.

Here’s the kicker: raw materials live on your balance sheet as an asset, but they don’t generate cash until they’re converted into sellable goods. If you overbuy or mistime purchases, your liquidity takes a hit—even if your margins look great on paper.

To manage this better:

• Forecast your production demand with realistic lead times

• Push vendors for more flexible MOQs or staggered deliveries

• Track inventory turns on raw materials and flag anything sitting longer than 60–90 days

The goal is to align purchases with actual demand, not wishful thinking.

WIP: The Invisible Inventory Holding Up Your Cash

WIP is the murkiest part of inventory—and often the most overlooked. Unlike raw materials or finished goods, WIP is harder to see. It lives in production batches, fermentation tanks, prep tables, or co-packer queues. But it ties up cash all the same.

I worked with a snack bar company that had a four-step process across three vendors. Dough was mixed at one facility, cut and baked at another, then shipped to a third site for packaging and labeling. Each handoff added delays. Meanwhile, their cash was stuck in half-completed bars that couldn’t be sold.

Wineries feel this pain acutely, especially during harvest. Grapes are crushed, fermented, aged, and bottled over a span of months or even years. All that time, your dollars are tied up in tanks, barrels, and aging stock.

Here’s where many founders get caught—hey don’t account for how long it takes to turn materials into money. That lag, the cash conversion cycle can stretch much longer than expected when WIP isn’t moving efficiently.

Signs you’ve got WIP trouble include:

• Long lag times between production stages

• Inventory that’s technically “in progress” but stalled due to bottlenecks

• Lack of real-time visibility into where batches are or what’s delayed

What helps is tightening production schedules and adding visibility tools. I’ve helped clients implement simple dashboards that show where every SKU is in the production process—what’s started, what’s delayed, and what’s ready to ship. That transparency helps flag where cash is being held hostage.

If you haven’t already, read our breakdown on Cash Conversion Cycle 101. It explains how to think about inventory time in financial terms.

Finished Goods: When Inventory Looks Good but Acts Like a Liability

Finished goods are where most founders feel safest—and that’s the trap. The product’s done, it’s boxed, labeled, ready to go. It feels like progress. But unless those goods are selling quickly, you’ve just got money sitting on shelves.

One winery I worked with had a beautiful vintage bottled and labeled for direct-to-consumer sales. But their email list wasn’t primed, the campaign wasn’t ready, and the wine sat in storage for three months. They weren’t selling—just spending on warehousing.

Same goes for CPG brands that overshoot demand. A granola brand I advised produced a full run for a national retailer, only to find out their shelf placement had been delayed by two months. They had pallets of finished goods, but no PO in sight.

Finished goods tie up more than just cash. They can lead to:

• Spoilage or expired shelf life

• Storage fees or inefficient use of space

• Forced markdowns or distributor discounts to clear aging inventory

You might see finished goods as an asset on the books, but if they’re not moving, they’re a liability in disguise. The longer they sit, the less valuable they become.

To keep this in check:

• Track Days Inventory Outstanding (DIO) and aim to lower it over time

• Sync sales forecasting with production plans to avoid overstock

• Revisit SKU performance regularly and cut underperformers fast

Strategies to Improve Liquidity Without Sacrificing Inventory

You don’t need to gut your production plan to free up cash. You just need to make inventory more efficient—especially in how it flows and how quickly it converts back into money. Making sure your finance, ops, and sales teams have regular meetings is another fix-all strategy, cutting silos and enhancing collaboration across the board.

Here are some of the most effective tactics we recommend to clients:

• Demand-based purchasing: Buy raw materials closer to actual sales needs. Build vendor relationships that allow smaller runs or delayed shipments.

• Tighter production scheduling: Map out production to avoid idle time and bottlenecks. This keeps WIP from dragging on and speeds up your cash cycle.

• Just-in-time (JIT) manufacturing:  For brands with predictable demand or strong co-packer partnerships, JIT reduces raw and WIP inventory without risking stockouts.

• SKU rationalization:  More SKUs mean more complexity—and more frozen capital. We helped one beverage brand cut their SKUs by 30% and saw a 22% lift in inventory turns.

• Inventory turns tracking:  Monitor how often your inventory sells and replenishes. Low turns = cash stuck. High turns = cash flowing.

Every founder I’ve worked with has had some version of a blind spot when it comes to how inventory affects their cash. What matters is finding it, quantifying it, and creating a plan to fix it.

And if you’re not sure where to start? Our operations services and finance services work together to help clients see the full picture—not just what’s on the shelf, but what it’s doing to your liquidity.

Inventory Is the Key to Cash—and BBG Can Help You Unlock It

Every ingredient you buy, every bar you half-produce, every finished bottle you store is either helping or hurting your ability to grow.

If you’re selling but still scrambling for cash, chances are your inventory is part of the problem. The good news? Once you know where your dollars are getting stuck, you can start freeing them up—without sacrificing your production goals or growth plans.

At BBG, we help CPG founders and winery owners understand how to make inventory a tool for liquidity, not a drain. And it starts with visibility.

Let’s find your hidden cash—reach out and let’s talk about what your inventory is really doing.