Diagnostic Tool
Working Capital Cycle Analyzer
This diagnostic measures the real cash cycle of the business: the time between when cash leaves the business to pay suppliers and when it returns through customer collections. This cycle determines how much working capital must be continuously funded to support ongoing operations.
In operating businesses, the working capital cycle is determined by three components: how quickly customers pay, how long inventory is held before sale, and how long before suppliers must be paid. When customer payment is slow and inventory turns are long, the business must fund a larger working capital gap. When supplier payment terms are extended, that gap is partially offset.
Understanding the working capital cycle matters because it determines how much of a business's operating cash is locked inside the operating structure at any given time. Profitable businesses can experience severe cash pressure simply because the cash conversion cycle is too long, and rapid growth amplifies this problem because more sales require proportionally more working capital to support them.
Average days between invoicing a customer and receiving payment.
Average days between receiving supplier goods and paying the invoice.
Average days of stock on hand before goods are sold or consumed.
Average monthly invoiced revenue for the working capital calculation.
Gross profit percentage used to estimate working capital at cost.
Total annual revenue for context and annualised working capital calculation.
Annual interest rate on any overdraft used to fund working capital.
Desired DSO target to model improvement scenario.
Desired stock turn target to model inventory improvement.
Many of the inputs requested by this diagnostic are metrics that disciplined operators typically monitor through internal management reporting. If a number requested here is not immediately available it often indicates that the current reporting structure does not isolate that metric clearly. Businesses operating with strong financial visibility normally track these figures regularly because they influence pricing decisions, supplier negotiations, operational planning, capital allocation, and risk management. Part of the work performed by MJB Strategic often involves helping companies design internal reporting structures that surface these metrics consistently so management can make better operational decisions.