Your P&L shows a profit. Your bank balance fell. Both are true, and the gap has a name: working capital.
A worked example
Take the sample company in our reports, a Riyadh distributor with fictitious figures. In the first nine months of the year it made a net profit of SAR 207,000. Its cash fell from SAR 510,000 to SAR 152,000.
- Customers owed SAR 256,000 more than at the start of the year. Profit booked, cash not collected.
- Stock grew by almost SAR 200,000. Cash sitting on shelves.
- SAR 90,000 of the loan was repaid. A cash cost that never touches the P&L.
- SAR 63,000 went on equipment. Paid now, expensed over years.
None of this is a loss. All of it is cash the owner can't spend.
Four numbers to check every month
- Debtor days: how long customers take to pay. In the example, 62 days against a target of 55.
- Inventory days: how long stock sits before it sells. 82 days against 70.
- Creditor days: how long you take to pay suppliers. 40 days against 45.
- Cash conversion cycle: debtor days plus inventory days, minus creditor days. 104 days. Your cash or your bank funds every one of them.
What to fix first
- Chase the oldest receivables first, biggest at the top. One late customer often explains most of the gap.
- Stop buying slow-moving stock until inventory days come down.
- Agree supplier terms you can keep, then pay on the due date, not early.
- Put loan instalments and equipment into a 13-week cash forecast so they never surprise you.
How Finance Pack helps
Every monthly report shows these four numbers against your targets, names the customers to chase, and shows the lowest cash point in the next 13 weeks.