Business Problem
Cash is locked up in receivables that are collected too slowly, payables that are settled too quickly, and inventory that sits too long. Without a structured working capital analytics framework, organisations cannot see the cash conversion cycle clearly, cannot identify which levers to pull, and cannot measure whether operational changes are actually releasing liquidity or merely shifting the problem between balance sheet lines.
Objective
Optimise liquidity and operational efficiency by building a working capital analytics dashboard that monitors DSO, DPO, inventory days, and the cash conversion cycle — with ageing analysis, exception reporting, and trend tracking that turns balance sheet data into actionable cash management decisions.
Who This Is For
- Treasury analysts managing short-term liquidity and cash positioning
- Financial controllers monitoring balance sheet health
- CFOs reporting working capital metrics to boards and investors
- Operations finance managers bridging procurement, sales, and finance
Required Data
- Accounts receivable ageing by customer and invoice date
- Accounts payable ageing by supplier and due date
- Inventory valuation and movement data
- Payment terms by customer and supplier
- Historical balance sheet data (12 months minimum)
Implementation Steps
- Define the business question: Where is cash trapped in our operating cycle, and how can we release it?
- Identify data sources: AR and AP sub-ledgers, inventory management system, payment term databases.
- Prepare and validate data: Reconcile sub-ledger totals to the balance sheet. Standardise ageing bucket definitions. Document payment term assumptions.
- Build the model: Calculate DSO, DPO, DIO, and CCC. Build ageing waterfall charts. Create exception reports for overdue balances.
- Create outputs: Working capital dashboard with trend lines, ageing analysis, and exception alerts.
- Measure success: Track DSO, DPO, CCC, and overdue balance reductions monthly.
Expected Outputs
- DSO/DPO/DIO trend dashboard with 12-month history
- Cash conversion cycle analysis with benchmark comparison
- Ageing analysis by customer and supplier tier
- Exception reports for overdue balances exceeding threshold
- Payment term optimisation recommendations
KPIs to Track
- Days Sales Outstanding (DSO)
- Days Payable Outstanding (DPO)
- Cash Conversion Cycle (CCC)
- Overdue balances as a percentage of total AR/AP
- Working capital as a percentage of revenue
Risks and Assumptions
- DSO improvement requires credit control process changes, not just dashboard visibility
- DPO extension must be balanced against supplier relationship risk and early-payment discount economics
- Inventory reduction initiatives need supply chain alignment to avoid stockout risk
- Sub-ledger data quality directly determines the accuracy of ageing analysis
