Working capital
Working Capital Cash Release Simulator
Trade receivables, inventory and trade payables — debtor days (DSO), inventory days (DIO) and creditor days (DPO). Not full net working capital. Turn a target for those three into the cash it would release, split by lever — enter days or balances, and the other side is always derived and always shown.
Input data
Annual figures drive the levers. Targets move on the sliders or in the fields.
Working out annual purchases
Purchases are COGS adjusted for the movement in stock: COGS + closing inventory − opening inventory. Fill both and the figure is worked out below; nothing is entered for you.
Which side are you typing?
- Daysin use
- You hold a days calculation. The balances are derived and shown beside them.
- Balances
- You hold a balance sheet. The days are derived, so the estimate ties back to real numbers.
Only the side you declare is editable. The page never shows two fields that must agree and lets you fight them.
The slider runs to twice the current value. The field accepts anything outside it.
The slider runs to twice the current value. The field accepts anything outside it.
The slider runs to twice the current value. The field accepts anything outside it.
Cash released at target
$21.48m
Reaching the target position would release $21.48m. Receivables contribute $10.00m, inventory $6.00m and payables $5.48m. The cash conversion cycle would improve by 30 days.
- Cycle now
- 75 days
- Cycle at target
- 45 days
- Improvement
- 30 days
Worth knowing
- DSO uses annual revenue, not credit sales. Cash sales make these days look better than credit DSO.
Both sides of every lever
Derived figures are marked, so the pair you typed and the pair we calculated are never confused.
| Lever | Days now | Days target | Balance now | Balance target | Cash release |
|---|---|---|---|---|---|
| Receivables | 50 | 40 | $50.00m | $40.00m | +$10.00m |
| Inventory | 60 | 50 | $36.00m | $30.00m | +$6.00m |
| Payables | 35 | 45 | $19.18m | $24.66m | +$5.48m |
| Total | +$21.48m | ||||
Italic figures are derived from the side you entered, and each one says so on hover. Every row shows both, so the estimate can be tied back to a real balance sheet.
Reuse the analysis
Copy the summary, or export the levers and the chart.
Transparent by design
How this calculation works
A working capital calculator for those three levers, not a cash flow forecast: the release carries no timing. A cash release is a one-off — the balance sheet moves once and stays there. The financing benefit is what holding that cash saves every year afterwards. They are different quantities and are never added together.
Trade working capital only
Trade receivables, inventory and trade payables. Not full net working capital: prepayments, accruals, deferred revenue, tax payable, provisions and cash itself all sit outside this and are not modelled here.
Receivables
(Current DSO − target DSO) × annual revenue ÷ days basis. Where credit sales are given they replace revenue, because DSO is a credit measure.
Inventory
(Current DIO − target DIO) × annual COGS ÷ days basis.
Payables
(Target DPO − current DPO) × annual purchases ÷ days basis. Where purchases are not given, COGS stands in and the substitution is stated on screen.
Cash conversion cycle (CCC)
DSO + DIO − DPO. It is measured in days, so changing the days basis changes the cash figures but never the cycle. The cycle is never converted into a single cash figure: each lever keeps its own flow.
Financing benefit
Total cash release × cost of funds. A recurring annual figure that is never added to the one-off release. A pre-tax borrowing rate is the usual input; it is not WACC unless you label it so, and an after-tax answer needs an after-tax rate. Where the position absorbs cash, the same arithmetic is a cost and is shown as one.
Snapshot, not average balances
Days here come from the balance on one date set against a full year of flow. A true DSO on average balances would smooth a month-end collection push; a snapshot does not, so the answer moves with the date the balance was taken from.
Even flow
Every formula assumes revenue, COGS and purchases arrive evenly across the year. A seasonal business will find the true release differs, and the direction of that error follows its season.
Growth
With no growth rate entered there is no growth term anywhere, which is why the field is blank by default. Enter one and the receivables line is shown in two parts: the days effect, and the cash that holding the target days on a larger book absorbs. Inventory and payables carry no growth term.
Sales tax mismatch
Receivables usually include sales tax while revenue does not, and payables include it while purchases may not. Days computed from a tax-inclusive balance against a tax-exclusive flow run high. Entering the rate removes the mismatch on receivables and payables; inventory is carried at cost and is left alone.
Days and balances
The two are the same arithmetic run in opposite directions. Whichever you type, the other is derived and shown, and the same total must come out either way.
Nothing is clamped
A target worse than the current position produces a negative release, described as cash absorbed. It is a real answer and is never floored at zero.