Most founders I work with are trained to chase revenue. Fair. Revenue matters.
But I’ve seen plenty of companies grow sales and still stay cash-starved because they ignore the working capital cycle.
At a practical level, working capital is the money you need to run the business before cash comes back in. It gets tied up in three places:
- inventory
- receivables
- cash needed for day-to-day operations
The cycle is simple:
cash → inventory → production → receivables → cash
What matters is how long that loop takes.
If it takes 8 months to turn cash back into cash, your balance sheet is doing heavy lifting just to support normal operations. If you can shrink that to 3 months, the same capital can support far more revenue.
That’s the part many teams miss: working capital efficiency is a growth strategy.
Two identical businesses can borrow the same amount and get very different outcomes. If one business turns working capital 1.5 times per year and the other turns it 4 times, the second company can generate dramatically more turnover without needing more capital.
That is not a vanity metric. That is financial leverage.
I liked the framing that “less is bad, more is worse” when it comes to inventory. I use a similar lens with portfolio companies. Too little inventory creates stockouts and lost sales. Too much inventory quietly absorbs cash, hides forecasting problems, and usually creates write-down risk later.
Same with receivables. Extending generous payment terms can make sales easier in the short run, but somebody is financing that customer. If it’s not a bank, it’s you.
And that’s where I think founders need to zoom out: this is not a finance-department problem.
Working capital lives in operations.
Purchasing affects raw material days.
Production affects cycle time.
Sales affects finished goods strategy and customer credit terms.
Collections affects how quickly receivables convert to cash.
So when I’m acting as fractional CFO, I don’t just ask for the P&L. I want to see:
- inventory days by category
- receivable days by customer cohort
- payable days
- production lead times
- forecast accuracy
Because if cash conversion is getting slower, the business is becoming less efficient even if revenue looks healthy.
A founder-friendly way to think about it:
Every extra day in inventory or A/R is cash you can’t use somewhere else.
You can’t use it for hiring.
You can’t use it for marketing.
You can’t use it to reduce debt.
You can’t use it to build resilience.
A lot of “we need more capital” problems are actually “our cash-to-cash cycle is too long” problems.
So if I were reviewing this with a leadership team, I’d ask a few blunt questions:
- Why do we hold this much inventory?
- Which SKUs actually need safety stock, and which ones are just habit?
- Where is production time longer than it should be?
- Which customers are effectively using us as a bank?
- Are we winning business because of product strength, or because we keep extending credit?
That last one matters. If your sales model only works when customers pay late, your margin may be weaker than it looks.
The biggest takeaway for me is simple: finance management is everybody’s job.
Not in a motivational-poster way. In a literal economic way.
The purchasing team influences cash.
The production team influences cash.
The sales team influences cash.
The finance team measures it, but the business controls it.
If you want healthier growth, don’t just ask, “How do we sell more?”
Also ask, “How do we get cash back faster?”
That question usually leads to better decisions. And better decisions usually show up in both profitability and resilience.