Most growing companies discover their working capital problem the same way. The business is expanding, revenue is up, the team is energised, and then one month the cash forecast shows a gap that cannot be explained by any single event. Nobody ordered too much inventory, nobody had a bad month on collections. The business simply grew, and growth consumed cash in ways that the P&L never showed.
Working capital is the invisible engine of the business. When it is managed well, you barely notice it. When it is not, it has a way of surfacing at the worst possible moment, usually when you are already stretched.
What Working Capital Actually Is
The academic definition, current assets minus current liabilities, is technically correct but not the most useful starting point for operational management.
The more useful definition is operational net working capital: the cash tied up in the operating cycle of the business, excluding cash itself and financial debt. In most companies this is:
Trade receivables, plus inventory (if applicable), minus trade payables.
This figure tells you how much cash the business has committed to funding its own operations at any given point: the cash you have already paid out for inventory or services, plus the revenue you have earned but not yet collected, minus the amounts you owe to suppliers that you are using as a temporary source of financing.
A positive operational NWC number means the business is a net user of cash in its operating cycle. The higher it is, the more cash is tied up. A negative number, which occurs in some high-turnover retail or subscription businesses, means the business collects cash from customers before it has to pay its suppliers. That is a structural cash advantage.
For most B2B companies and product businesses, operational NWC is positive and growing as revenue grows, which is why working capital management matters most in growth phases.
How to Calculate It and What Healthy Looks Like
Calculate operational NWC at month-end, every month, as part of the management reporting pack. The three inputs come directly from the balance sheet.
Track it in absolute terms (the CHF amount) and as a percentage of revenue (NWC as a percentage of annual revenue is the standard industry benchmark basis). Also track the three component metrics separately:
DSO (days sales outstanding): the average number of days it takes to collect payment after invoicing. For Swiss B2B companies with standard 30-day terms, a DSO of 35 to 45 days is typical, accounting for real-world payment delays. Above 60 days is a warning. Above 90 days means either credit risk issues or a collections process that has broken down.
DOH (days of inventory on hand): how many days of sales volume are currently sitting in stock. Industry benchmarks vary enormously, from near-zero for pure services to 90 days or more for some manufacturing businesses. The relevant benchmark is your own historical trend and the operational minimum your supply chain requires.
DPO (days payable outstanding): how long you are taking to pay suppliers. This is partly within your control (your payment process and negotiated terms) and partly determined by supplier terms. Swiss standard terms are typically 30 days; 45 to 60 days is achievable with negotiation.
The cash conversion cycle (CCC = DSO + DOH - DPO) combines all three. It tells you the net number of days between paying for inputs and collecting from customers. Every day you reduce the CCC releases cash proportional to daily revenue.
What Happens During Growth
The reason working capital surprises growing companies is that its cash impact scales with revenue but the P&L only captures the profitability of the incremental revenue, not the working capital cost of funding it.
Here is the arithmetic. A company with CHF 8M of revenue, 45-day DSO, 30-day DOH, and 30-day DPO has operational NWC of approximately CHF 1.2M: about 15 percent of revenue.
When revenue grows to CHF 10M, and all three metrics stay constant, NWC grows to CHF 1.5M. The business has to find CHF 300K of additional cash to fund the working capital of the larger business, regardless of how profitable the growth was. If net profit on the incremental CHF 2M of revenue was 10 percent, the business earned CHF 200K of profit and consumed CHF 300K of cash. Net position: CHF 100K worse despite a profitable year.
This arithmetic is why the fastest-growing companies sometimes have the most acute cash problems. They are profitable. The working capital is simply growing faster than the retained earnings can fund it.
The solution is not to slow growth. It is to manage the working capital metrics actively so the cash cost of growth is as small as possible, and to plan for the working capital funding requirement in the budget and the cash forecast.
The Three Levers
DSO is influenced most directly by invoice timing, payment terms, and collections discipline. Getting invoices out faster, shortening payment terms where the commercial relationship allows, and following up overdue invoices systematically each produce measurable DSO improvements.
DOH is influenced by purchasing discipline, safety stock parameters, and the management of slow-moving SKUs. The key operational decision is the trade-off between holding more stock to avoid stock-outs and holding less stock to reduce working capital. That trade-off should be made explicitly, with a clear understanding of the cash cost of each option, rather than by default.
DPO is influenced by negotiated supplier terms and by payment process efficiency. Paying suppliers reliably and promptly (within agreed terms) establishes the credibility to negotiate better terms. Many businesses pay before the due date because of approval bottlenecks, which is an avoidable form of cash leakage. Ensuring that payments are made at, but not before, the due date is a simple and free cash optimisation.
By Industry: What Good Looks Like
Benchmarks matter because “is our NWC good?” is a relative question. A cash conversion cycle of 30 days looks different in a software business versus a manufacturing company.
For professional services and consulting (no inventory): DSO of 30 to 45 days and DPO of 30 days is typical. CCC of 0 to 20 days. Businesses in this range are managing working capital well.
For wholesale and distribution: DSO of 30 to 50 days, DOH of 30 to 60 days, DPO of 30 to 45 days. CCC of 20 to 60 days is typical. Above 75 days warrants investigation.
For manufacturing: DSO of 40 to 60 days, DOH of 30 to 90 days (depending on production cycle), DPO of 30 to 60 days. CCC can legitimately be 30 to 90 days in capital-intensive manufacturing.
For retail: DOH is the primary metric, typically 20 to 45 days for fast-moving categories. DPO often exceeds DSO in large retail, producing negative or near-zero CCC.
The Swiss-specific context: Swiss B2B payment culture is generally reliable but relatively slow. 30-day terms are standard but 45 to 60 days in practice is common. This tends to produce higher DSO in Swiss businesses than comparable businesses in the UK or US, where payment culture is faster.
Working Capital in the Management Report
Working capital metrics belong in the management report alongside the P&L and cash flow. A monthly one-page report that shows P&L but does not show DSO, DOH (if applicable), and DPO is missing the leading indicators of cash generation.
Present the three metrics in trend form: the current month value, the prior three months as context, and a target or benchmark. Flag any metric that has moved meaningfully in a direction that warrants explanation, the same way you would flag a revenue variance. A DSO that increased by 8 days in a month is the same kind of signal as a 5 percent revenue shortfall: something changed and it needs to be understood.
The controller who presents working capital alongside profit, and who explains the relationship between the two clearly, is providing management with a genuinely complete picture of the business’s financial position. That completeness is what distinguishes management accounting from bookkeeping.
Struggling with cash visibility? Book a free 30-minute call to discuss your situation.
Alessandro Ratzenberger is a fractional CFO and business controller based in Zurich, with 15 years of operational finance experience at Dufry Group and Bomi (UPS Group).
