# Managing working capital

*The cash trapped in stock and unpaid invoices, and how to get it back.*

## Production summary

- Modules to record: 1
- Total script: 316 words, about 2 minutes of finished audio
- Voices: Amara (host) and Nadia (practice educator)
- Level: Level 3 to 4, managers and owners

## Accreditation wording that must appear in the description

- **The CPD Certification Service** (planned): Application scheduled.

> Do not upgrade any of these words in a description or a thumbnail. Aligned is not accredited, and planned is not approved.


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## Where the cash is trapped and how to release it

**Runtime** about 2 minutes. **Words** 316. **Starts at** 00:00 in the full course recording.

### Learning outcomes to state on camera

- Calculate the cash conversion cycle from the accounts
- Diagnose which stage is consuming cash
- Apply practical improvements at each stage
- Explain the working capital cost of growth

### Script


`[CUE 1]` *The cash conversion cycle as a loop with days marked at each stage.*

**AMARA**  [00:00]
I need cash by the end of the month. Where do I look first?

**NADIA**  [00:05]
At what you are already owed. Not the bank, not the supplier, not your pricing. Almost every business that feels short is owed more than it needs, and nobody has made collecting it their job.


`[CUE 2]` *Stock days plus debtor days minus creditor days worked through with figures.*

**AMARA**  [00:19]
We do chase. Sometimes.

**NADIA**  [00:21]
Sometimes is the problem. Most late payment is not a refusal, it is an absence of a request. Invoices that nobody asks about get paid after the ones somebody rings about, every single time.


`[CUE 3]` *Invoice timing comparison: on delivery versus at month end.*

**AMARA**  [00:34]
Fine. What is next after that?

**NADIA**  [00:37]
When you invoice. Many businesses deliver on the second of the month and invoice at month end, then wait thirty days from there. You just gave away four weeks of cash for nothing.


`[CUE 4]` *Volume discount trap: cash on the shelf against the discount earned.*

**AMARA**  [00:50]
That is embarrassingly simple.

**NADIA**  [00:52]
It is free and permanent, which is a rare combination. Then look at stock. Specifically, look for what has not moved in a year, and be suspicious of volume discounts.


`[CUE 5]` *Growth doubling stock and debtors while cash falls.*

**AMARA**  [01:04]
Why? A discount is a saving.

**NADIA**  [01:06]
A five per cent discount for buying eight months of a product you sell in two is not a saving, it is six months of your cash sitting on a shelf. That cash cannot pay wages, and shelves do not pay interest.

**AMARA**  [01:23]
And the other side, paying suppliers. Just pay late?

**NADIA**  [01:26]
Use your terms fully. Do not exceed them. Going beyond agreed terms costs more than it saves: you lose priority when stock is short, you lose settlement discounts, and a small supplier may simply not survive carrying you. That is a relationship you cannot rebuild cheaply.

**AMARA**  [01:45]
You said growth makes all of this worse.

**NADIA**  [01:48]
Double your sales and you roughly double your stock and your unpaid invoices, both funded before the new customers pay. The big contract everybody celebrates is often the thing that breaks the business, and the profit on it is irrelevant until the money actually lands.

### Sources for the on screen credit

- Managing cash flow, Institute of Chartered Accountants in England and Wales
- Prompt Payment Code, Small Business Commissioner
- Late Payment of Commercial Debts (Interest) Act 1998, legislation.gov.uk

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