When "Just Meeting the Minimum" Leads to Maximum Cash Strain
Minimum order quantities, or MOQs, are an operational reality that seems practical and simple on the surface. From your first vendor relationship as a CPG brand, you've likely dealt with this concept. But over the years, I've seen too many founders underestimate the monetary ripple that MOQs can cause for their businesses.
Meeting supplier minimums can pull cash out of your business long before inventory converts to revenue. In a sector where liquidity can be foundational for success, you can't afford to gamble with MOQs that aren't right for you.
At Balanced Business Group, we work with CPG businesses to unpack the true cost of operations, including "just meeting the minimum." In this article, I'll define MOQs further, discuss how they put cash flow and liquidity at risk, and help you evaluate whether MOQs are worth it for your business.
What Are MOQs and Why They're Risky for Cash Flow
A MOQ is the smallest amount of product a supplier is willing to sell in a single order. Suppliers set this figure to help ensure they cover fixed production costs, minimize changeovers, and maximize efficiency.
For the supplier, MOQs make sense. However, in practical settings, they aren't always feasible for CPG brands.
For example, imagine that a winery wants to launch a limited run of a new rosé for a spring release. Its bottle supplier requires a minimum order of 9,000 units for the bottle shape and color. The label printer has a 5,000-label MOQ per SKU.
Between bottles, labels, and other packaging components, it's a working capital commitment of tens of thousands of dollars before a single grape is crushed. And if the business wanted a truly limited release, the MOQs don't match the production needs, resulting in excess packaging inventory that may not convert to revenue soon — or ever.
When you agree to a large MOQ, you commit significant cash upfront — often long before inventory hits the shelf let alone converts to revenue. That creates a delayed return on investment, tying up cash you might need for marketing, payroll, or R&D. And if sales don’t move as quickly as expected, you’re stuck with excess product eating up storage costs — or worse, going stale or obsolete.
How MOQs Trap Liquidity Across the Supply Chain
MOQs don’t just tie up cash at the moment of purchase. They can lock it up across every stage of the supply chain. That strain builds quietly, but the impact on liquidity can be significant.
It starts with the purchase order. You’re putting down thousands — or even tens of thousands — of dollars for packaging, ingredients, or finished goods. That cash is gone from your operating budget before production begins. If there’s a long lead time, you could wait weeks or months before the product is ready to ship.
Then there’s shipping and warehousing. Once your order is fulfilled, you’ll be sitting on inventory that hasn’t sold yet. You’re paying to store it, insure it, and possibly service short-term debt used to fund the purchase in the first place.
The real cash trap happens after delivery in cases when sell-through is slower than expected. I’ve seen brands with six-figure cash positions on their balance sheets that were entirely tied up in slow-moving inventory. One of our clients, an RTD cocktail brand, came to us with 2.5 years of product on the books, all stemming from a supplier MOQ. He was under pressure to sell equity at a distressed valuation just to keep the lights on.
We worked together to map out how much cash was stuck, build a sell-through strategy that kept his burn rate low, and prioritize which expenses to handle as cash freed up. He stayed in control of his business and is now on track toward healthy profitability.
This is the real cost of ignoring the full cash cycle. It’s not just the upfront spend. It’s the long-term hit to financial agility.
Evaluating Whether a MOQ Is Worth It
Not every MOQ is a vendor red flag or a sign you should put brakes on the supply chain. In some cases, the price break or efficiency is worth the cash outlay. But CPG brands must analyze outlays before committing by comparing how much cash goes out versus how fast inventory is likely to convert to revenue.
At BBG, we help brands run this kind of analysis using practical metrics. For example, Days Inventory Outstanding (DIO) shows how long it takes on average to sell what you produce. If you pair DIO with your cash conversion cycle, you can get a pretty clear picture of how long cash flow might be tied up in inventory.
For instance, say your DIO is 90 days — on average, it takes around 3 months to sell through your inventory. If your supplier requires payment up front and your customers take an average of 30 days to pay their invoices, your total cash conversion cycle is 120 days. That 4 months your cash is partially tied to inventory.
However, if your supplier's MOQ requires that you buy even more inventory, that cycle stretches even further unless product demand increases.
You also need to factor in sales velocity, seasonality, and demand forecasting. Slow turns or uncertain demand amplify the risk of overcommitting to a supplier’s minimum. If you can’t reasonably project how quickly that inventory will move, the safer option may be to hold onto your liquidity — even if it means paying slightly higher per-unit costs.
The same is true when cash flow is tight. It might be worth paying higher co-packer or tolling fees to maintain liquidity and some financial agility. This is certainly the case with emerging brands, and those that care about margins — like investors and lenders — understand that they're lower for emerging businesses for this reason. Obviously, though, you do want to do your homework to confirm what milestones you need to hit over time to improve gross margins as you grow and can support higher MOQs.
Smarter Purchasing Strategies to Avoid MOQ Cash Crunches
Even when MOQs seem fixed, you may have more flexibility than you think. There are several ways to manage large order requirements without draining your working capital or straining supplier relationships.
Some approaches we explore with clients include:
Combining orders across SKUs to hit volume minimums while spreading inventory risk across different products
Request staggered shipments so you're not storing or paying for everything at once
Coordinate shared production runs with other brands that use the same co-man or packaging format
Negotiate vendor terms to ease pressure via shifts in payment timelines or order windows
Use contract manufacturing for smaller batch runs, especially for limited seasonal products or launches
Restructure production timing to align better with sales velocity or promotional periods to reduce DIO
That said, emerging brands don’t always have negotiating power, especially early on. Sometimes it’s worth paying a little more upfront or accepting less-than-ideal MOQs to work with a quality partner. In those cases, the key is to stay proactive. Reevaluate the relationship regularly, and keep your cost structure top of mind as you scale.
Don't Let Vendor Minimums Wreck Your Cash Flow
Minimum order quantities might be a standard in vendor relationships, but that doesn't mean they should go unchecked. Large MOQs can drain liquidity, inflate storage costs, and increase your cash cycle — sometimes beyond what your business can support.
But MOQs shouldn't dictate your strategy — you should! The right planning, forecasting and negotiation tools can help you make smarter purchasing decisions, protect your working capital and support sustainable growth.
At BBG, we help you evaluate these tradeoffs through an experienced financial lens. If you're rethinking vendor terms or your cash flow model, reach out to our team for personalized support.
