A business grew sixty percent in a single year. New contracts, expanded capacity, a team that was finally clicking. It should have been the year everything paid off. Instead, by October they couldn't make payroll without drawing on their line of credit, and by December the line was fully drawn and the bank wanted to talk. The jobs were profitable. The work was real. The problem was that nobody had planned for what growth does to working capital — and it nearly took down a perfectly sound business.
Working capital is the cash you need to fund operations in the gap between paying out and getting paid. You buy materials, deploy labor, and run overhead long before the customer's check arrives. The interval between your cash going out and your cash coming back is called the cash conversion cycle, and the longer it is, the more cash your business consumes just to operate. Here's the part that catches growing companies: when revenue doubles, the amount of cash tied up in receivables and inventory roughly doubles too. Growth doesn't relieve the pressure. It intensifies it. That's why so many businesses face their worst cash crunch in their best year.
You can actually measure this, and you should. Start with days sales outstanding, or DSO — your accounts receivable divided by annual revenue, times 365. It tells you how many days, on average, customers take to pay you. A DSO of 30 means customers pay promptly; a DSO of 75 means three-quarters of a quarter's revenue is locked up in receivables at any moment. Then look at days payable outstanding, which is how long you take to pay your suppliers, and your days of inventory on hand. Put them together — DSO plus inventory days minus payable days — and you get your cash conversion cycle. Multiply that by your daily revenue, and you have a dollar figure: the amount of cash you need funded at all times just to keep the doors open at your current size.
The good news is that every piece of this is a lever you can pull. Invoice the moment work is done — every day you delay billing adds directly to your DSO. Follow up on collections aggressively and put a real process behind it; businesses with formal collection processes collect noticeably faster than those without. On the other side, pay your suppliers on their actual terms rather than early — if you have net-30, pay on day 29, because paying on day 5 is just giving your cash away for free. And on large projects, ask for deposits and progress payments tied to milestones; even a modest upfront deposit fundamentally changes the cash cycle. Manage these numbers deliberately and growth becomes something you can fund. Ignore them, and your best year becomes your most dangerous one.