A profitable sale can consume cash when the customer pays after the company has paid suppliers, staff and taxes.
CFO with sales and operations
Weekly ageing, monthly review
Prepare customer and vendor ageing.
Customer contracts and invoices.
Working capital is shaped by receivables, inventory, payables, advances and other operating balances. The accounting profit records revenue and expense under the applicable framework; cash follows actual collection and payment terms.
Ageing quality matters more than the total. A receivable due in thirty days is different from an old disputed invoice. Payables that appear to fund growth can hide supplier stress or statutory defaults.
GST and TDS can create cash timing separate from commercial settlement. Finance should map invoice, tax, credit eligibility, collection and vendor payment rather than assume one follows the other.
| Control | What it covers | Operating rule |
|---|---|---|
| Receivables | Customer invoices awaiting collection. | Age by due date and dispute. |
| Inventory or WIP | Cash tied before sale or billing. | Track slow and obsolete items. |
| Payables | Amounts owed to suppliers and authorities. | Separate negotiated terms from overdue. |
| Cash conversion | Days from cash outflow to collection. | Model by product and customer. |
Segment the cycle by customer, channel and product. A single average can hide one enterprise customer consuming most of the cash.
Set escalation thresholds for overdue amounts, blocked invoices, slow inventory and statutory dues. Working capital improves through operational ownership, not finance reminders alone.
Document the decision, owner, due date and evidence expected. A verbal explanation should be converted into a board note, approved working, contract amendment, portal acknowledgement or reconciliation before the item is treated as closed.
Rules, forms, thresholds and interpretations can change. The operating team should use the latest official source and the actual company facts instead of copying a control from another entity or prior year.
Ask four questions: Is the obligation or accounting treatment applicable? Has the underlying transaction been completely recorded? Does the evidence agree with the books and portal? Has an independent reviewer challenged the exception?
The review should distinguish a timing difference from an error, a judgement from a missing document, and a control failure from a one-time operational delay. Repeated small exceptions deserve root-cause action because they often become material during audit, fundraising, notice or distress.
The operating record should connect the control stages—receivables, inventory or wip, payables, cash conversion—to the same transaction population. If the source list, accounting ledger, tax return, board record and management dashboard use different populations, the review can appear complete while exceptions remain outside the test.
Management should define an exception threshold, but the threshold must not hide repeated failures. A small error occurring every month can signal weak master data, unclear ownership or a broken interface. The reviewer should record root cause, immediate correction and preventive action separately.
Closure requires evidence. At minimum, the file should show who prepared the work, who reviewed it, which source documents were used, what differences remained and when the next follow-up is due. Screenshots without context or spreadsheets without source references are not a durable control record.
Finance should reconcile the operational schedule to the general ledger and explain every reconciling item by amount, age and owner. Manual journals, overrides and post-close changes deserve heightened review because they can bypass the normal transaction flow.
The board view should separate reported results from estimates and management metrics. When a KPI does not follow the statutory accounting framework, provide a stable definition and a bridge to the closest financial statement line so the measure cannot be changed silently.