Working Capital and Liquidity
Helped two profitable e-commerce businesses improve liquidity by reviewing inventory, supplier terms, receivables and discounting, supported by a rolling cash forecast.
2
Businesses returned to a liquid position
- Working Capital
- Cash Flow
- Business Consulting
Context
Inventory, marketing and supplier payments created cash demands before customer receipts became available. Reported profit did not show when the business could fund its obligations.
The problem
Both businesses reported a profit but struggled to meet obligations consistently. The cash tied up in the operating cycle was not clearly measured.
Analysis
- 01Cash conversion cycle rebuilt from the ledger: days of inventory, days of receivables and days of payables, measured rather than assumed.
- 02Inventory analysed by movement to separate stock that turns from stock that was quietly funding itself out of the business.
- 03Supplier terms and payment runs mapped against the date customer money actually clears, rather than the date the sale is recorded.
- 04Discounting and promotional activity costed against the cash it consumed, not only the revenue it produced.
- 05A rolling thirteen week cash forecast built so the next shortfall becomes visible before it arrives instead of after.
Recommendation
Release cash through slow-moving stock, better-aligned supplier terms and a review of discounting. Use a thirteen-week forecast to plan payments and identify shortfalls early. Both businesses reached a position where the operating cycle funded itself.
Confidentiality
Stock levels, supplier terms and cash positions are commercially sensitive and are not published here. The method is described in full. The figures stay with the client.
Example view
Illustrative presentation of the approach. Client data remains confidential.
Cash Conversion Cycle
Illustrative example · client figures withheld- Days inventory held78
- Days sales outstanding34
- Days payable outstanding22
- Cycle, before90
- Cycle, after41
- Funded by operationsyes
What changed
More cash available to fund the operating cycle.
The review identified cash tied up in slow-moving stock and payment terms that put supplier payments ahead of customer receipts.
Neither business needed outside funding to fix a liquidity problem that its own operating cycle was creating.
What this demonstrates
Profitability and liquidity need separate measures.
- 01Review profit alongside cash timing to understand whether the business can meet its obligations.
- 02Working capital is a commercial decision set, not an accounting outcome: stock policy, payment terms and discounting all decide it.
- 03The work identified similar operating-cycle issues in both businesses, while addressing each company’s stock and payment patterns.
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Investment Raise on a Profit Share
A Sri Lankan operating business
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