Practical clarity for CEOs who want cash to be an engine, not an anchor.
Working capital is the engine room of your business: cash, receivables, payables, inventory. But the real question is not the definition. It’s whether that capital is working for your business, or you for it.
Too often capital sits idle or is used in ways that slow growth. The result is a frustrating paradox: sales are rising, but profit and cashflow are lagging. That’s not a mystery of the market. It’s a structural design flaw that we can fix.
What “working” capital looks like
Capital is working when it helps you:
- Deliver reliably and profitably
- Convert sales into cash predictably
- Invest in growth without constant firefighting
If cash sits idle, inventory collects dust, or receivables stretch, that capital is a drag not a tool.
Common places capital is trapped
- The silent receivables: Customers that treat you like a zero-interest bank while you pay suppliers on time.
- The inventory museum: Stock held “just in case” that ties up cash and gathers dust.
- The legacy anchor: Equipment or space that was once vital but is now a drain on the balance sheet.
- The debt that wants more debt: Borrowing facilities that are not needed and just incur unnecessary overhead.
- The capital donation: Capital that is allocated without any clear expectations of return or bottleneck identified.
Practical steps to free trapped capital
- Measure the right things e.g. days sales outstanding, inventory turns, cash conversion cycle.
- Prioritize cash drivers i.e. identify the products/customers that generate the best cash and margin.
- Free up cash quickly. Try: accelerate invoicing, tighten terms, reduce slow stock.
- Use debt strategically. Borrow to multiply cash flow (to increase capacity, or reduce lead-time), not to mask recurring shortfalls.
- Redeploy idle assets: lease, sell, or repurpose unused, or underused, equipment and space.
Quick CEO diagnostic (10 minutes)
- List the top three places cash is tied up.
- Identify one product or customer that consumes the most working capital. Does it also provide the highest return by a good margin?
- Estimate the cash benefit of a 10% improvement in inventory turns or receivables days outstanding.
- Identify all borrowings and the value they create.
Small, focused moves here create immediate breathing room.💰
If you’d like a short diagnostic to find where your capital is trapped and how to free it, book a short conversation. We’ll map the first practical steps together.