The most stressful year of a machine-tools maker's life was also his best on paper. Orders up 40%. Revenue at a record. And him, lying awake every night working out how he'd make payroll on Friday. Profitable business, empty bank account: the trap that catches more growing manufacturers than any downturn does.
Growth, it turns out, eats cash. Every new order meant buying material upfront and waiting two or three months to get paid. The faster he grew, the wider the gap between money going out and money coming in. He was financing his customers' businesses with money he didn't have.
The number that explained everything
His days sales outstanding, the average time it took to actually collect an invoice, had crept past 80 days, while his own suppliers wanted paying in 30. That 50-day gap, multiplied across a growing order book, was the cash crunch. The profits were real. The problem was when the money actually arrived.
What he changed
No dramatic restructuring. He started tracking receivables by customer and by age, chased overdue invoices the day they slipped instead of a month later, took small advances on big jobs, and offered a tiny discount for early payment. Unglamorous habits, applied without fail.
Shaving 31 days off collection on a growing order book released a wave of trapped cash, enough that he stopped dipping into the overdraft to cover routine payments. The order book was the same as before. What changed was how fast the money came in.
"I never had a profit problem. I had a problem getting paid for the profit I'd already earned."A machine-tools maker, Coimbatore
If this is you right now
Start by working out your DSO and your aged receivables this week. Most owners are shocked at how long they're really waiting, and how much of the overdue amount sits with just a few customers. Tighten your terms, chase early, and treat collected cash, not booked revenue, as the score that counts. The other half of the working-capital story sits in your inventory.
