Working Capital Cycle

Posted on 21st March 2024 by Streets What's trending?

Image to represent Working Capital Cycle

Every business has a working capital cycle. This is the time it takes for your business to turn net current assets into available cash.

The longer the working capital cycle, the more time it takes for your business to get a robust cash flow. It’s good practice for businesses to manage their cycle by looking at each step where possible. This could be by selling stock or product quicker, collecting monies owed sooner and possibly paying bills later on.

Factors will vary between industries, but essentially how long it takes you to sell your stock / product and how long it is before you get paid will impact the length of the working capital cycle for your business.

For example, a manufacturing company purchases raw materials on 60 days credit from a supplier for a product which they expect to sell in two months’ time to a client. Payment from the client, however, may not be made immediately – say, not for another 30 days – and the manufacturer still needs to pay the supplier before their credit payment terms of 60 days are up.

It is of course quite normal for businesses to be in a positive working capital cycle and have a period of time where there is a gap in available cash. If this is the case, it is still very possible to continue to grow your business.

As mentioned above, there are ways to handle each step of the cycle to maximise your cash flow as much as you can. And in theory they’re simple: reduce stock days, reduce the time taken to get paid and increase creditor payment days:

  1. Firstly, get stock / product sold as soon as you can and shorten the length of time you hold it. This will also help you avoid stockpiling or carrying obsolete stock and might even save you some money on storage costs.
  2. To reduce your receivables days, invoice management could be a solution. Shorten your invoice terms, offer early payment discounts, and / or improve your credit collection process. A widely used method for invoice management is invoice finance to accelerate the revenue you’re due within a few days of the invoices being raised.
  3. Probably the most challenging step of the cycle is to change lengthened credit terms with your suppliers.

If you would like help in plugging the gap in your businesses cashflow, our Banking & Finance team within Streets Financial Consulting are on hand. Many businesses use forms of finance such as invoice finance, working capital loans, revolving credit facilities and tax funding solutions (for corporation tax and VAT). Our team has access to a panel of over 50 funders to introduce you to.

For further information please contact Martyn Shakespear, Head of Banking & Finance, by emailing or Tina Hayes, Associate Director, at

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.


The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.

Expert insight and news straight
to your inbox

Related Articles

Boost Your Restaurant's Cash Flow with These Top Tips!

Maintaining a healthy cash flow is crucial for the success of any restaurant. Here are five key strategies to get you started: Optimise Menu Prices Ensure your dishes are priced for both competitiveness and profitabilityStreamline InventoryReduce waste and free up cash by using smart inventory management techniquesNegotiate with SuppliersBetter terms ...

Property Finance - unlocking opportunities with confidence and support

Exploring, navigating and understanding the complex landscape of property finance options can not only be time consuming, but hard to understand with the diverse range of financing options that are available in the market. It is essential from the outset for business owners to carefully evaluate their financing and ...

Child Benefit Updates

You may have heard about the recent changes to the High Income Child Benefit Charge which were announced in the Spring Budget. This is something that will affect several of our clients, and the changes can influence whether claims are made for child benefit or whether those that ...

You might also be interested in...