There is a misconception about working capital. People often think it is simply about having enough cash. It isn't. Sometimes the money is there. It is just busy doing something else. Sitting in inventory. Waiting on customers. Tied up in purchasing commitments. Moving through a supply chain that takes longer than expected.

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For a pharmaceutical manufacturing business, that was where we needed to look. Follow the money.

The business operates in a sector where supply, regulation and working capital are closely connected. Products have to be available. Customers have their own payment cycles. Suppliers have their own terms. Imported inputs can introduce FX and supply risks. Regulatory requirements add another layer of planning.

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So the question was not simply: "How much money do we have?" It was: "Where is the money, and how efficiently is it moving?"

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That meant looking beyond the financial statements. Inventory is one of those things that can look reassuring on a balance sheet. You have stock. Therefore, you have assets. But stock that is not moving is not doing the business much good. Too little inventory can interrupt production and disappoint customers. Too much can tie up cash, increase holding costs and create the risk of obsolescence. The answer sits somewhere in between.

So we looked at inventory movement alongside the wider financial picture. What was being purchased? How quickly was it moving? What was the relationship between inventory levels and customer demand? Where were the control points? And how much visibility did management actually have?

 

Then we followed the customers. Receivables tell another part of the story. A sale recorded in the accounts is not the same thing as cash in the bank. So customer credit, collection periods and receivables had to be considered alongside inventory and purchasing.

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Again, the pieces were connected.

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Inventory affects cash.
Credit terms affect cash.
Supplier lead times affect inventory.
Purchasing affects cash.

And all of them affect the ability of the business to serve its customers.

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The work therefore centred on strengthening financial and inventory management, and on the reporting management needed to see what was happening across the business. We looked at controls around inventory and customer movements. We considered the key measures that matter in a manufacturing environment, including inventory days, receivable days, supplier lead times and gross margin.

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The objective was not to produce more reports. It was to make the existing information more useful. Because there is no prize for having fifty spreadsheets if nobody can tell you what they mean. For a pharmaceutical business, financial management cannot sit in isolation from operations. It all comes back to the same question:

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Is the business converting its resources into cash and sustainable performance efficiently?

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That is the kind of question we like to answer. Not just: what does the number say?

But:
Why is it saying that?
What is it telling us about the business?
And what should we do about it?

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And sometimes, when you follow the numbers far enough, they show you where the business has been hiding its money all along.