Oct 07 2025
Dreaming of extra cash flow for your business?
Welcome to the club.
We've all been there. Scrolling through our financial statements, dreaming of what we could do with a little more cash on hand.
But here's the thing…
There's probably thousands (or even millions) of dollars of working capital trapped in your business cycle right now.
Locked up.
Hidden in plain sight.
Waiting to be unleashed.
Here's what you're about to discover:
The secret to increasing business efficiency isn't just through cost-cutting or sales optimization. It's by unlocking all the extra cash that's already available to you in your working capital.
It's about:
In simple terms…
Net working capital is basic subtraction.
Take your current assets like cash, inventory, and accounts receivable. Subtract current liabilities, including accounts payable and short-term debt. The remainder is your net working capital.
But here's the thing…
For many business owners, that's where it ends.
They view net working capital as an accounting concept instead of a fluid, flexible measure of business health. The reality is that net working capital is a key lever in the financial machine of your business.
When you optimize your working capital, you have more cash available to grow and invest in your business.
Businesses that optimize working capital cycles take less time to convert their investments into cash. They have greater liquidity. They're more resilient when markets fluctuate.
Numbers don't lie.
McKinsey has reported that businesses can reduce their accounts payable and receivable balance by 30 percent or more within weeks. A 30% increase in cash flow that can be achieved quickly is an opportunity many businesses cannot afford to miss.
So, when economic conditions are already hard, why does this matter more than ever?
The effective net interest rate for small companies is 6.8%, compared to 3.7% for large corporations. That's a huge cost difference. Every day that you have your money tied up in your business is costing you more.
So, why should you care about unlocking cash with working capital?
Your working capital has an effect on the efficiency of your business in some very real ways. Optimize it well and you have an internal source of funds, without having to take on more expensive borrowing or diluting your equity.
Businesses that can effectively manage this see improvements in:
Most business owners start at the wrong end of the telescope when it comes to net working capital.
They get fixated on the individual components like inventory, receivables, and payables, without looking at how they connect in the whole working capital cycle.
But it's the efficiency of the working capital cycle in total that's the most important number.
Your cash conversion cycle is this single number that tells you how many days it takes to turn your business operations (inventory purchase and sale) into cash.
The more quickly you can get to cash, the more efficient your business.
Let's break this down.
The average number of days it takes your business to pay a supplier.
Minus.
The average number of days it takes to collect payment from your customer.
Minus.
The number of days it takes to turn raw materials into sales.
Equals.
The number of days that represent your company's net cash conversion cycle.
Shorter this number is the better.
If you want to see real-world results, work in these three key areas that have the biggest impact.
Speed up how fast you get paid is one of the easiest ways to unlock cash.
Look at your invoicing process first. How long does it take an invoice to go out after a sale? There are often gaps and delays in invoicing that cost businesses days and weeks of cash flow.
Here are the three things that work.
Digital invoicing alone can reduce your days sales outstanding (DSO) by 5 to 10 days. On a business that does $1 million in monthly sales, that's more than $150,000 of incremental cash flow.
Paying suppliers late is not the goal here.
Strategic optimization of payables is.
A large number of companies pay bills as soon as they receive them. They offer themselves no payment terms. They give away free financing.
Move your supplier payments so that you get more time between when you're invoiced and when you pay.
These are three things that work here.
Inventory is where most businesses get trapped in their working capital.
On the one hand, excess inventory strangles your cash flow. On the other hand, understocking means lost sales and unhappy customers.
The solution is in data-driven, analytical inventory management. Get better at demand forecasting so you can anticipate what you need and when.
Inventory and stock management needs to be fine-tuned and automated. Find a tool that works for you and leverage it to manage your working capital.
Here's a fact that most business owners don't realize.
Most working capital improvements don't come from policies or changes to processes. The biggest opportunity for working capital optimization comes from using technology and data.
AI and machine learning are increasingly being used to improve net working capital. They can help to analyze customer payment patterns, fine-tune inventory, and spot cash flow bottlenecks before they occur.
Practical technology solutions include:
Choose the ones that work for your business and find the ones that integrate easily with your existing technology stack.
Even if you're a savvy business owner, it's easy to fall into these working capital optimization traps.
Mistake #1: Optimizing individual components in isolation. Don't focus on just one area of your working capital. Look at your whole cycle.
Mistake #2: Paying little attention to suppliers. Most business owners spend all their time looking at customers. Their suppliers are a passive part of their operations. Optimizing payables is about having good supplier relationships.
Mistake #3: Going too hard in one area. Businesses often cut inventory as a way to improve working capital ratios. But that can backfire if customers start to experience stockouts and poor service levels.
Mistake #4: Tracking the wrong metrics. Keep an eye on your total cash conversion cycle. Benchmark to know how you compare with your industry averages.
Mistake #5: Viewing working capital as a project. Businesses tend to work on their net working capital once. But it's a journey, not a destination.
Optimization requires continuous effort. Economic conditions change and as your business grows, the optimal balance in your cash cycle will also shift.
Successful working capital optimizations rarely focus on one element in isolation.
You're not just working to improve receivables. You're not just working on your payables. You're optimizing the relationship between the three.
Take an iterative approach.
Start with where the biggest quick wins are. For most businesses, that's going to be receivables by automating the invoicing and payment process.
As your cash improves, layer in the payables and inventory elements. The goal isn't to be perfect. The goal is to be better than yesterday.
Working capital optimization isn't rocket science. But like any business change, it does require a systematic approach.
Step one. Calculate your current cash conversion cycle.
Step two. Select one area: receivables, payables, or inventory. Focus on one place where you can unlock some cash.
Step three. See the results.
Step four. Apply this to other areas of your business.
Step five. Rinse and repeat.
Tell us what you need and we'll get back to you right away.