Working Capital, Cost & Profitability Optimisation

What is working capital and profitability optimisation?

Working capital is the cash tied up in running the business day to day: money owed by customers, stock on hand, less what you owe suppliers. Profitability is what's left after all costs. Many businesses grow sales but find cash and margins getting worse — because receivables stretch, stock builds up, costs creep, and some products or customers lose money.

Optimisation means analysing where cash and profit are going, and making targeted changes: faster collections, leaner inventory, better supplier terms, pricing, and cost control.

The key terms

The measures that matter:

Receivable days (DSO)

How long customers take to pay, on average.

Inventory days (DIO)

How long stock sits before being sold.

Payable days (DPO)

How long you take to pay suppliers.

Cash conversion cycle

Receivable days plus inventory days, minus payable days — how long cash is tied up.

Contribution margin

Revenue less variable costs for each product, customer, or channel.

Cost drivers

The activities and choices that drive costs, like order sizes, returns, or logistics.

Invoice discounting

Converting receivables to cash early, including through platforms like TReDS for MSME suppliers selling to large buyers.

Why it matters

Small improvements release significant cash and profit:

Growth consumes cash

Every rupee of new sales needs working capital before it turns into cash.

Borrowing costs

Excess working capital is often financed by interest-bearing debt.

Hidden losses

Some customers, products, or channels lose money once all costs are counted.

Stock risk

Slow-moving and expired stock ties up cash and ends in write-offs.

Collections

Late payers effectively borrow from you for free.

Resilience

Leaner working capital and healthy margins help businesses weather downturns.

Valuation

Buyers and investors value businesses with strong cash conversion.

Who is this for?

Micro and small enterprises have legal protection on payment terms from buyers — a useful lever on receivables.

The main levers

Where improvements usually come from:

What we'll need from you

Financials

Recent accounts and monthly management figures.

Receivables and payables

Ageing reports by customer and supplier.

Inventory data

Stock by item, location, and age.

Sales data

Sales, discounts, and returns by product, customer, and channel.

Cost data

Direct and overhead costs, and how they're allocated.

Terms

Customer and supplier credit terms.

Engagements are quoted per project, sometimes with ongoing monitoring.

How we improve cash and margins

Our approach:

1. 1

   Diagnose

   We measure the cash conversion cycle and margins by product, customer, and channel.

2. 2

   Find the leaks

   Slow receivables, excess stock, and unprofitable business are identified.

3. 3

   Prioritise

   Actions are ranked by cash and profit impact and ease.

4. 4

   Implement

   Policies, processes, and terms are changed with your team.

5. 5

   Measure

   Progress is tracked monthly.

6. 6

   Embed

   Dashboards and routines keep improvements in place.

Sustaining the gains

Keeping improvements:

Monthly KPIs

Track receivable, inventory, and payable days monthly.

Collections routine

Keep a regular follow-up rhythm for overdue invoices.

Stock reviews

Review slow-moving stock regularly.

Pricing reviews

Revisit pricing and discounts periodically.

Customer profitability

Review profitability by customer at least annually.

Update forecasts

Reflect changes in cash forecasts.

Benefits and responsibilities