How to reduce your WCR: 7 actionable levers
Invoicing, stocks and payments: 7 levers to examine your WCR, compare costs and monitor their effect in a cash flow forecast.
Co-founder and Fractional CFO
Contents
Reduce BFR consists of examining the money mobilized in inventories and customer receivables, less supplier debts. The potential depends on the business model, contracts and payment practices. Start by reconciling accounting data and actual deadlines before setting a goal.
Lever 1: make invoicing and collections more reliable
Check unissued invoices, disputes and overdue receivables. Assign reminders to a manager and confirm expected dates with customers. A documented timeline is more useful than a uniform goal of reducing customer lead time.
Lever 2: examine stocks by reference
Identify dormant references, seasonality and replenishment times. Reducing stock can mobilize less cash, but also create a shortage or commercial discount. Compare these costs before adjusting orders.
Lever 3: review supplier deadlines
Compare the negotiated dates to the dates actually paid. Discuss changes with suppliers in compliance with applicable contracts and rules. A longer period may modify the price, the quality of service or the commercial relationship.
Lever 4: study customer deposits
A deposit or payment in stages can bring the collection closer to the work undertaken. Its relevance depends on the activity and the agreement of the client. If a discount is considered, compare its cost to the financing need covered.
Lever 5: coordinate supplier deposits
Place supplier deposits in the same schedule as expected revenue. Explore a schedule linked to the stages of the project, without assuming that the supplier will accept a reduction in deposits.
Lever 6: monitor work in progress
In production or service, identify the steps that tie up resources before invoicing. Better coordination between operations and finance can reduce delays. The gain is measured on the observed flows and the implementation costs.
Lever 7: compare financing solutions
Factoring can finance certain receivables depending on their eligibility. Examine the amount actually available, fees, guarantees, recourses and customer relationship management. Compare the proposals on an identical scope with your financial partners.
Measure the effect before generalizing
Fictional example: an invoice of €20,000 scheduled for week 6 is collected in week 4 after confirmation from the customer. Available cash increases by €20,000 in weeks 4 and 5; the total collected over the six weeks remains the same. Any discount reduces the net gain. This shift is neither additional income nor recurring savings.
Use a 13-week cash flow forecast to compare the initial scenario, the actions selected and what was achieved. Track volume, seasonality and price effects separately.
The Seasonally case describes a mission combining margins by channel, stocks and financing of BFR. It presents its scope and limits, without extrapolating an average gain to all companies.
