The Working Capital Cycle
Cash in → cash out timing and how to shorten it.
“Two businesses with identical P&Ls can die and thrive respectively — and the difference is the number of days between when cash leaves and when cash comes back.”
The Insight
The working capital cycle is an invisible force that either funds your growth or starves it. Every day it shortens adds runway; every day it lengthens eats it. Most founders have no idea what their cycle is — and are therefore surprised by cashflow they could have predicted.
01
The Three Levers
Days Sales Outstanding (how long until customers pay you) — shorten with faster invoicing, tighter terms, deposits. Days Inventory Outstanding (how long stock sits before selling) — shorten with better forecasting, just-in-time supply. Days Payable Outstanding (how long you take to pay suppliers) — lengthen deliberately, within contract. Your cycle = DSO + DIO − DPO. Every day you remove is a day of free runway.
02
The Typical Trap
A founder lands a big contract. They assume the contract is cash. It isn't — it's receivable, 60 days out. Meanwhile, they hire, buy, and commit immediately. When cash hits, it's already spent on things that haven't generated it yet. Six months in, every month feels tight despite revenue growing. The cycle got longer, nobody noticed, and growth became a cash-destruction engine.
03
Shortening the Cycle Deliberately
Pick one lever per quarter. DSO: enforce 14-day terms, require deposits over £10K, call past-due at day 30. DIO: review slow-moving stock monthly, cut SKUs under 20% sell-through. DPO: renegotiate supplier terms to 45 or 60 days during annual reviews. A 15-day cycle improvement on £1M of revenue frees up £40K of working capital — essentially free growth capital, forever.
The Takeaway
Calculate your cycle this week. Pick one lever. Shorten by 5 days in 90 days. Repeat. Cashflow mastery is not a mystery — it's a sequence, and the sequence is knowable.
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