From Cash to Confidence
Building a Strategic Working Capital Plan for Sustainable Growth
Profit on paper does not always translate into cash in the bank. Many businesses in Ireland run into difficulties not because they are unprofitable, but because their cash is tied up in stock, slow customer payments, or tight supplier deadlines. This is where working capital planning becomes critical. By actively managing the balance between receivables, payables, and inventory, businesses can improve day-to-day liquidity, reduce financial stress, and create the confidence to invest in long-term growth.
What Is Working Capital and Why It Matters
Working capital is the difference between current assets (cash, accounts receivable, inventory) and current liabilities (trade creditors, payroll, short-term borrowings). At its simplest, it is a measure of whether your business can meet its short-term commitments with the resources available.
Positive working capital provides breathing space. It allows you to cover payroll, pay suppliers, and take on new opportunities without disruption. Negative working capital, on the other hand, can result in delayed payments, strained relationships, and even missed opportunities—regardless of how profitable the business appears.
Assessing Your Current Position
Before making changes, it is important to establish a clear picture of your working capital cycle. This involves looking at how cash moves through the business:
Receivables: Are invoices issued promptly? What is your average collection time (days sales outstanding, or DSO)? Slow collection directly impacts available cash.
Payables: Are you paying suppliers too quickly? Could you extend terms without damaging vital relationships?
Inventory: Is capital tied up in slow-moving stock? Conversely, is a lack of stock creating bottlenecks and lost sales?
By tracking these areas, patterns begin to emerge that highlight where cash is being held up unnecessarily.
Building a Strategic Working Capital Plan
With the analysis complete, the next step is to create a plan that makes working capital more efficient and reliable:
Improve stock management – adopt more accurate forecasting methods, reduce excess inventory, and focus on stock that drives turnover.
Strengthen receivables processes – issue invoices on time, automate reminders, and consider discounts for early settlement where appropriate.
Negotiate supplier terms – small adjustments can make a significant difference to cash flow. Long-standing relationships often allow for more flexible arrangements.
Use cash flow forecasting – rolling forecasts help anticipate shortfalls, prepare for seasonal fluctuations, and ensure you have a buffer in place.
Taken together, these measures reduce reliance on expensive short-term borrowing and create more predictable financial performance.
Linking Working Capital to Business Growth
Working capital management is not only about stability; it directly supports strategic decisions.
Recruitment and payroll: Hiring staff requires the certainty that wages can be met consistently.
Marketing and expansion: Campaigns, new premises, or product launches are only possible with reliable liquidity.
Investment readiness: A well-managed working capital cycle demonstrates control and discipline—qualities lenders and investors value highly.
Efficient working capital acts as the bridge between day-to-day operations and longer-term ambitions.
Monitor, Review, and Adjust
Markets shift, customers change behaviour, and suppliers adapt terms. Working capital therefore requires ongoing attention.
Establish key metrics such as DSO, days payable outstanding (DPO), and inventory turnover.
Review these regularly, ideally quarterly, to identify trends early.
Carry out stress testing: consider the impact if customer payments slowed, or if a supplier reduced credit terms.
By embedding regular reviews, you can stay ahead of potential issues and keep your plan aligned with business goals.
Practical Benefits
Irish SMEs that take a structured approach to working capital often see tangible results:
Less reliance on overdrafts or high-interest borrowing
More flexibility to seize opportunities when they arise
Stronger supplier and customer relationships, built on reliability
A steadier financial position that makes long-term planning easier
The benefits extend beyond finance; smoother cash flow often reduces pressure on management and staff, creating a healthier working environment.
A strategic working capital plan is more than an exercise in financial housekeeping. It is a practical tool that allows businesses to move from short-term problem-solving to long-term confidence. By managing receivables, payables, and stock with intention, leaders can reduce uncertainty, protect stability, and create the conditions for sustainable growth.
At NKC, we help businesses turn financial data into practical plans. If you would like to explore how to strengthen your working capital position, our team is ready to support you.