Before you seek a loan or an investor, it’s worth checking the money already trapped inside
your business. Working capital—the gap between your current assets and current liabilities—is
where that money hides, and for most companies it’s the cheapest financing available. This
week: the three levers of working capital and how AI helps you pull them without breaking
things.

The framework is the cash conversion cycle: how many days pass between paying for inputs
and collecting from customers. It has three components. Days Inventory Outstanding (how long
stock sits), Days Sales Outstanding (how long customers take to pay), and Days Payable
Outstanding (how long you take to pay suppliers). Shorten the first two, responsibly lengthen the
third, and cash appears—not as a one-time windfall but as a permanent reduction in the
financing your operations require.

Inventory is usually the biggest prize for product businesses. Every unit on the shelf is cash
wearing a costume. The tension is real—too little stock means missed sales—which is why this
is a genuine AI success story. Demand-forecasting models that ingest your sales history plus
seasonality, promotions, and even weather patterns consistently outperform gut-feel reordering,
cutting stock levels while reducing stockouts. Just as valuable: AI-driven dead-stock

identification, flagging the SKUs quietly consuming cash and shelf space so you can discount
them out.

Receivables we covered in September, but the working-capital lens adds one point: DSO
improvements compound. A business doing $500K a month that cuts DSO by twelve days frees
roughly $200K—permanently.

Payables deserve nuance. Stretching suppliers is a lever, but a crude one; squeeze the
vendors who give you flexibility and you’ll pay for it in service, priority, and pricing. The smarter
play is deliberate payment timing: AI-enabled AP systems can recommend, invoice by invoice,
whether to take an early-payment discount (often an excellent annualized return) or pay exactly
on the due date—optimizing the portfolio of payments against your actual cash forecast rather
than paying everything the Friday it happens to get approved.

The unifying theme is visibility. Working capital decays through a thousand unexamined
defaults—reorder points set years ago, credit terms granted casually, invoices paid early out of
habit. AI’s contribution is continuous attention: it watches every SKU, every invoice, and every
payment date so that each one gets a deliberate decision.

Run the numbers on your own cash conversion cycle this week. Most owners who calculate it
for the first time find several weeks of cash they didn’t know they were lending out for free.

Next week: expense management—death to the shoebox of receipts.