Improving working capital comes down to three levers: collect faster, hold less inventory, and pay suppliers later (without damaging relationships).
1. Accelerate receivables collection
Every day a receivable sits uncollected is a day of working capital consumed. - Switch to automatic billing (Stripe subscriptions, ACH) - Offer 1–2% early payment discounts (often worth it vs. credit line interest) - Send automated reminders at 15/30/45 days overdue - Require deposits or upfront payment for new clients
2. Optimize inventory levels
Excess inventory is working capital locked in a warehouse. - Use demand forecasting to right-size safety stock - Negotiate vendor-managed inventory (VMI) with key suppliers - Identify and liquidate slow-moving SKUs
3. Extend payables (without damaging supplier relationships)
Paying suppliers on day 45 instead of day 20 frees 25 days of working capital. - Negotiate net-45 or net-60 terms with major suppliers - Use corporate cards with float (30-day net) for smaller purchases - Prioritize extending terms with suppliers who need your volume
4. Use a revolving credit line for gaps
A credit line isn't "fixing" working capital — it's a bridge for seasonal gaps. Keep your current ratio above 1.5x even after drawing on the line.
5. Move to annual billing for subscription businesses
Annual upfront billing converts future receivables into immediate cash. SaaS companies with annual billing typically have 40–60% better cash collections than monthly-billed peers.
Track your progress at the Working Capital Calculator.