GROWING SALES, SHRINKING CASH: A CEO’S WARNING SIGN
Sales are growing. The P&L shows a profit. Yet paying suppliers is becoming increasingly difficult.
Where is the money?
Often, it is tied up in inventory, overdue receivables and the gap between customer collections and supplier payments.
Working capital deserves a place on the CEO’s agenda. Decisions across the business shape it:
• Sales negotiates payment terms and helps resolve customer disputes.
• Purchasing commits cash through order quantities and supplier terms.
• Operations influences production lead times, work in progress and inventory.
• Finance coordinates the forecast and makes the consequences visible.
A purchasing discount can lose its appeal when it creates months of excess stock. A large order can put pressure on liquidity when materials must be paid for long before the customer pays.
My recommendation: combine a rolling 13-week cash forecast with clear targets for inventory, receivables and payables. Compare successive forecasts, investigate significant changes and assign responsibility for corrective action.
Release cash while protecting customer service and supplier reliability.
What is currently putting the most pressure on your company’s cash: inventory, collections or payment terms?
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Ariovaldo Lopes da Silva | Professor Ari
40+ years in finance, controllership and industrial management
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Original article on my blog — in Portuguese
#WorkingCapital #CashFlow #CEO #CFO #OperationalExcellence
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