Working capital is where strategy meets cash. Disciplined management of receivables, inventory, and payables often funds growth more cheaply than new debt — if understood explicitly.
Drivers
Each day of DSO or DIO has a dollar impact at your scale. Quantify it in board materials so trade-offs are visible when sales or procurement propose changes.
Seasonal businesses should show intra-year swings — averages hide March cash crunches.
Operations
Finance cannot optimise working capital alone. Stocking policies, credit terms, and supplier relationships require joint ownership with operations and sales.
Set targets with accountability — not blanket 'reduce stock' mandates that harm service levels.
Forecasting
Cash flow forecasts should include balance sheet movements, not only P&L projections. For many mid-market firms, the balance sheet drives bank breaches more than headline profit.
Link working capital assumptions to the same drivers used in revenue forecasts.
Working capital improvement is a strategic project — not a month-end tidy-up.
Frequently asked questions
Which working capital levers matter most?
Depends on the business — often inventory and receivables for distribution; WIP and billing for services.
Should finance own working capital alone?
Best results combine operations and finance — metrics with named owners and targets.
How do we link working capital to forecasts?
Driver-based models should move inventory, receivables, and payables with volume and terms assumptions — not static percentages.
Working capital review
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