Industrial Manufacturing
Manufacturing Working Capital Optimization Case Study
Unlocking $4.2M in operating cash flow by balancing DIO inventory holding with strict trade credit DPO extension.
1. Commercial Context
Operating in the Industrial Manufacturing sector requires balancing competitive credit extension terms against ongoing treasury cash flow requirements.
2. The Numbers & Worked Arithmetic
Gross Credit Revenue: $12,500,000
Average Accounts Receivable: $1,450,000
Computed Collection Period (DSO) = ($1,450,000 ÷ $12,500,000) × 365 = 42.34 Days
Average Accounts Receivable: $1,450,000
Computed Collection Period (DSO) = ($1,450,000 ÷ $12,500,000) × 365 = 42.34 Days
3. Strategic Takeaways
By enforcing 14-day automated dunning reminders and offering 1.5% early payment settlement discounts, receivables collection speed improved by 22%, unlocking over $800,000 in liquid working capital.