EBITDA can grow while cash deteriorates. Working capital trapped in debtors, inventory and supplier terms quietly funds your customers — not your growth. This diagnostic quantifies how much cash is being absorbed and where.
Run the Diagnostic ↓Cash trapped in debtors, inventory and weak supplier terms quietly funds your customers — not your growth. EBITDA looks acceptable on paper but cash never arrives. The business is profitable on the income statement and cash-constrained in reality.
This diagnostic identifies the precise working capital levers that are absorbing cash — and quantifies the enterprise value impact of releasing them.
Days sales outstanding above industry benchmarks means the business is providing interest-free credit to customers. Each day of debtor improvement on a $50M revenue business releases ~$137K in cash.
Excess inventory funded by the business — driven by poor demand translation, supplier minimums or service level anxiety — absorbs significant working capital without generating return.
Payables days below industry benchmarks mean the business is voluntarily subsidising its supply chain. Structured supplier payment terms can release significant cash without cost.
Working capital discipline requires operational management, not accounting adjustment. Debtor days are a function of credit policy and collections behaviour. Inventory days are driven by demand forecasting and supplier management. Both require operating accountability, not treasury activity.
The diagnostic identifies where the cash is. The mandate determines how it gets released — and how fast.
Discuss a MandateCash conversion rate measures the proportion of EBITDA that translates into free cash flow. A cash conversion rate of 80% means that for every $1 of EBITDA generated, 80 cents reaches the bank. In well-managed industrial businesses, rates of 85–95% are achievable.
Debtor days in industrial distribution typically range from 38 to 58 days, with top-quartile performers achieving 35–42 days. Inventory days vary by sector — from 28 days in high-velocity distribution to 90+ days in industrial manufacturing.