Our Services - Corporate services - Corporate restructuring

Working Capital Management

“Cash is king” is something of a business cliche but like many cliches it contains more than a grain of truth. 

At any point in time a big chunk of your business’ capital is tied up in stock and debtors.  The net impact of this is offset by the credit extended to you by your suppliers.  This is typically referred to as working capital:

stock + debtors - creditors = working capital

This is commonly measured in terms of days:
Debtor days:   the time it typically takes your customers to pay you
Stock days:     the average length of time you hold stock before it is sold
Creditor days: the length of time you typically take to pay your suppliers

debtor days + stock days - creditor days = working capital cycle

Improving your working capital management can release cash that would otherwise be tied up.  This surplus cash can be a potential source of funds, for example to finance capital expenditure.  If a business is looking to grow or change its product mix or operating model, the impact of this on working capital should be carefully considered.

More businesses experience financial difficulties as a result of running out of cash than fail because the business is not profitable.  A growing business can be showing record profits but tying up more and more capital in stock and debtors which can mean that there is not enough cash available to pay the bills.

We work with management to understand your working capital cycle.  We can analyse historical performance and identify trends.  We can benchmark your performance against our knowledge and experience of similar businesses and suggest improvements to help free up cash flow. 

We can assist management with the preparation of cash flow forecasts to identify in advance any pinch points or funding shortfalls and advise on strategies to address these.