Background
A Mumbai-based precision engineering manufacturer supplying components to automotive OEMs recorded annual sales of over ₹18 crore. Although order volumes were increasing, the company frequently faced cash shortages.
The Challenge
Despite being profitable, the company experienced working capital pressure
- Customer payments were received after 75–90 days.
- Suppliers required payment within 30 days.
- Salaries & fixed operating expenses
- ₹2.5 crore was locked in receivables
The Solution
After analysing the cash conversion cycle, the business adopted a liquidity strategy:
- Monthly cash flow forecasting.
- Improved receivable monitoring.
- Better inventory planning.
- Appropriate working capital financing against eligible receivables
The Outcome
Within a few months:
- Supplier payments became more predictable.
- Production interruptions were avoided.
- Cash flow visibility improved significantly.
- Management could focus on executing new orders instead of arranging emergency funds.
- Business growth continued without disrupting day-to-day operations.
Key Learning
A profitable business can still experience financial stress if cash inflows and outflows are not aligned. Effective liquidity management helps businesses maintain operational stability, respond to opportunities, and build resilience during periods of growth.
Business success is measured not only by profitability, but also by the ability to maintain healthy cash flow throughout the business cycle.
