Guide — Cash flow
Working capital: reading your operating cycle.
Why a profitable business can run short of cash, and how to size the financing that absorbs the gap.
The cycle
You pay at 30 days. Your clients pay at 60.
Every business lives inside a gap. Your suppliers, your payroll and your rent are due on fixed dates; your clients, meanwhile, settle their invoices on their own schedules. In between, your cash is the one advancing the money — every day, on every invoice.
That gap has a name: the operating cycle. It is measured in days: the time your inventory sits in stock, plus the time your clients take to pay, minus the time your suppliers give you. The longer the cycle, the more your business finances its own day-to-day activity.
Financing that gap is your working capital requirement. It is not a sign of weakness: it grows mechanically as your sales grow. A business can be profitable on paper and short of cash every week — its profits sit in its receivables, not in its bank account.
The math
Sizing the amount: a simple calculation, in days.
An honest estimate comes down to three figures: your monthly sales, your average client payment terms and your supplier terms. Example, for illustration: a business selling $100,000 a month, paid at 60 days while paying its suppliers at 30, permanently finances about one month of sales — roughly $100,000 — before growth even enters the picture.
Two mistakes come up often. Sizing on your quietest month: the first busy stretch then recreates the very crunch you wanted to avoid. And confusing a permanent need with a one-time need: a gap that returns every month calls for a durable structure; a seasonal gap, for a flexible tool.
The signs of undersized working capital look the same from one business to the next: suppliers paid late "just this once", profitable contracts turned down because the upfront costs cannot be advanced, month-ends negotiated day by day. Those are not sales problems. They are structure problems.
The structure
Working capital or a credit line: it depends on the gap.
For a permanent need — the structural gap between your terms — structured working capital provides a stable cushion, sized on your real cycle. For a need that rises and falls — a season, a large contract, inventory — a commercial credit line, drawn and repaid as money comes in, is often the better fit.
Either way, the financial partner will read the same thing: consistency between the amount requested and your operating cycle, backed by figures. That is the file we build with you. Ceneris Conseils is an advisory firm, not a direct lender: we structure working capital and credit line applications, subject to eligibility, and present them to the appropriate financial partners.
A cash-flow gap to structure?
Talk to an advisor: 514-448-3727, extension 102 for financing — or book your strategic consultation online.
Advisory firm, not a direct lender. Financing subject to eligibility; no financing, rate or timeline is guaranteed.