Working Capital Is Strategy

A profitable growth curve can still be a cash drain when inventory and receivables absorb capital faster than the business generates it.

The argument.

The cash conversion cycle is simple: days inventory outstanding plus days sales outstanding minus days payable outstanding. Its consequences are not simple at scale.

If growth requires inventory to be purchased long before the resulting sale is collected, every additional dollar of revenue creates a temporary financing requirement. With sufficient growth, that temporary requirement becomes permanent. The business can show improving revenue and accounting profit while repeatedly asking for more cash.

This is why working capital belongs inside strategy rather than underneath finance administration. Channel mix changes receivable terms. Assortment breadth changes inventory. Promotions change the timing and volatility of demand. Supplier terms change the amount of growth the balance sheet can carry.

A growth plan that does not model its cash requirement is not a plan. It is an assumption that financing will remain available when needed.