Private Equity
The order book grew. So why was the business short of cash?
18 October 2026 · FinAnalytic Editorial · 3 min read
Consider a manufacturer with its busiest quarter yet. The order book is healthy, the sales team wants another production line, and Friday’s supplier payments are becoming difficult. Everyone agrees the business is growing. The bank balance tells a less comfortable story.
Follow one order all the way to the bank
In this illustrative business, a large customer pays 90 days after accepting delivery. Materials must be bought much earlier. Production, inspection and dispatch take time, and a missing acceptance document delays the invoice again.
The sale may generate an accounting profit while cash remains committed for months. More orders can deepen that funding gap before they improve the bank balance.
AlixPartners’ research on private equity value creation highlights working capital as an often overlooked source of liquidity. FTI Consulting also argues for treating it as part of the investment plan. Neither observation means every receivable can be collected immediately or every stock reduction is sensible.
Put a number on the timing gap
Here is a simplified calculation, not a company forecast. At annual credit sales of ₹36.5 crore, daily sales average ₹10 lakh using a 365-day year. If collection time falls by ten days, steady-state receivables could fall by roughly ₹1 crore, assuming the same sales run rate and sales mix.
That is potential cash released from the balance sheet. It is not ₹1 crore of extra profit, and the cash does not necessarily arrive on the day a new collection policy is announced.
The useful next question is what causes those ten days. If invoices are routinely submitted late, better billing may help. If a major customer contractually pays after 90 days, a spreadsheet target will not change the contract.
Read the detail behind the average
For our manufacturer, a diligence team could ask for invoice-level ageing, disputed balances, customer acceptance records and credit notes. It should also examine stock by item: raw material needed for confirmed orders behaves differently from a discontinued product sitting in the corner.
An improving average can be misleading. A sudden increase in cash sales may make collection days look better while the oldest unpaid invoices remain unresolved. Look at the overdue amounts themselves.
Supplier balances need the same care. Delaying an agreed payment may briefly improve cash and damage a relationship essential to production.
Give each improvement an owner
A practical operating plan might put dispatch documentation with operations, invoice submission with finance and commercial disputes with the account manager. The weekly review should ask which blocked payments moved and why.
It should also protect service. Cutting inventory until deliveries fail is a poor trade. Set stock decisions against lead times, demand uncertainty and the cost of a production stoppage.
Ask how growth will be funded
Before approving the new production line, model the additional cash tied up as sales expand. Include a slower-collection case and a delay in reaching planned utilisation.
The manufacturer may still need fresh capital. But the discussion is now grounded in how the business turns orders into money, and how much funding the next stage will actually require. That is a stronger starting point for a private equity conversation.
Sources & further reading
- AlixPartners, Speed to Cash: How Working Capital Can Accelerate PE Value Creation
- FTI Consulting, Working Capital’s Next Chapter for Private Equity
Research checked 18 October 2026. Scenarios and calculations are illustrative unless identified as reported facts.