Working Capital Solutions for
Manufacturers

Optimize cash flow and unlock the potential of your manufacturing business with strategic working capital solutions.

Manufacturing equipment financing

Understanding Working Capital for Manufacturers

Working capital is the difference between your current assets and current liabilities—essentially, the funds available for day-to-day operations. For manufacturers, maintaining optimal working capital is critical for purchasing raw materials, managing inventory, paying employees, and funding the production cycle before receiving payment from customers.

At Schapira CPAs, we understand the unique working capital challenges manufacturers face, from long production cycles to seasonal fluctuations and supply chain disruptions. Our working capital solutions are designed to help you optimize cash flow, reduce financing costs, and ensure your business has the liquidity it needs to operate efficiently and pursue growth opportunities.

Working Capital Challenges for Manufacturers

Long Cash Conversion Cycles

Long Cash Conversion Cycles

Manufacturing often involves extended periods between purchasing materials and receiving customer payments, creating cash flow pressure.

Inventory Management

Inventory Management

Balancing raw materials, work-in-progress, and finished goods inventory without tying up excessive capital.

Seasonal Fluctuations

Seasonal Fluctuations

Managing working capital through seasonal production cycles and demand variations.

Supply Chain Disruptions

Supply Chain Disruptions

Maintaining adequate working capital to weather supply chain challenges and unexpected delays.

Growth Financing

Growth Financing

Securing sufficient working capital to fund expansion without compromising day-to-day operations.

Customer Payment Terms

Customer Payment Terms

Navigating extended payment terms from large customers while meeting your own financial obligations.

Our Working Capital Optimization Approach

Step 1

Comprehensive Assessment

Step 2

Benchmarking

Step 3

Solution Design

Step 4

Implementation Support

Step 5

Ongoing Monitoring

Financial professional analyzing working capital data

Our Working Capital Solutions

In today's competitive manufacturing landscape, having the right equipment isn't just an operational necessity—it's a strategic advantage. Our specialized financing solutions help you acquire the machinery and technology you need without depleting your working capital.

1. Working Capital Loans

Short-term financing solutions designed specifically to fund day-to-day operations, with flexible repayment terms aligned with your cash flow cycle.

2. Accounts Receivable Financing

We help manufacturers understand and maintain protection under this federal law that limits a state's ability to impose income tax on out-of-state businesses selling tangible personal property.

3. Inventory Financing

Use your inventory as collateral to secure funding, particularly useful for manufacturers with significant inventory investments.

4. Supply Chain Financing

Optimize payment terms with suppliers while preserving working capital and strengthening supplier relationships.

5. Cash Flow Forecasting

Develop accurate cash flow projections to anticipate needs and proactively manage working capital requirements.

6. Working Capital Optimization

Comprehensive analysis and improvement of inventory management, accounts receivable, accounts payable, and production processes to maximize efficiency.

Success Story

Metal components manufacturer worker operating machinery

Metal Components Manufacturer

The Challenge

A mid-sized metal components manufacturer was experiencing cash flow constraints due to a 75-day cash conversion cycle. With $12M in annual revenue, they were struggling to fund growth opportunities while maintaining day-to-day operations.

Our Solution

We implemented a comprehensive working capital optimization strategy, including inventory management improvements, accounts receivable acceleration, and strategic supplier negotiations.

Results:

  • • Cash Conversion Cycle: Reduced from 75 days to 45 days
  • • Working Capital Freed: Increased from $0 to $850,000
  • • Inventory Turns: Improved from 4.2x/year to 6.8x/year
  • • Days Sales Outstanding: Reduced from 65 days to 32 days

"Schapira CPAs helped us transform our working capital position, giving us the financial flexibility to invest in new equipment and take on larger contracts without the constant cash flow pressure we faced before."

— CFO, Metal Components Manufacturer

Key Working Capital Metrics

Cash Conversion Cycle (CCC)

The time it takes to convert investments in inventory and other resources into cash flows from sales.

Formula:

DIO + DSO - DPO

Target:

Industry-dependent, but lower is generally better

Days Inventory Outstanding (DIO)

The average number of days a company holds inventory before selling it.

Formula:

(Inventory ÷ COGS) × 365

Target:

Minimize while avoiding stockouts

Days Sales Outstanding (DSO)

The average number of days it takes to collect payment after a sale.

Formula:

(Accounts Receivable ÷ Revenue) × 365

Target:

As low as possible without harming customer relationships

Days Payable Outstanding (DPO)

The average number of days a company takes to pay its suppliers.

Formula:

(Accounts Payable ÷ COGS) × 365

Target:

Optimize without damaging supplier relationships

Working Capital Ratio

A measure of a company's short-term liquidity.

Formula:

Current Assets ÷ Current Liabilities

Target:

1.5 to 2.0 is generally considered healthy

Inventory Turnover

How many times a company sells and replaces its inventory in a period.

Formula:

COGS ÷ Average Inventory

Target:

Higher is generally better, but depends on industry

Frequently Asked Questions

These principles guide everything we do and define our approach to serving our clients.

While there's no one-size-fits-all answer, manufacturers typically aim for a working capital ratio (current assets divided by current liabilities) between 1.5 and 2.0. However, the optimal level depends on your industry, business cycle, growth plans, and seasonal fluctuations. Our team can help you determine the right working capital target for your specific situation.

Equipment financing offers several potential tax advantages, including Section 179 deductions that allow you to deduct the full purchase price of qualifying equipment in the year it's placed in service (up to certain limits). Additionally, you may benefit from bonus depreciation, regular depreciation deductions, and interest expense deductions on loans. The specific benefits depend on your tax situation, the financing structure, and current tax laws. Our team can help you understand how to maximize these benefits for your manufacturing business.

The equipment financing process typically takes between 2-10 business days from application to funding, depending on the complexity of the transaction, the amount being financed, and the completeness of your documentation. For established manufacturing clients with strong financials and straightforward equipment purchases under $250,000, we can often secure approval within 24-48 hours. Larger or more complex transactions may require additional time for underwriting and structuring. Our team works to expedite the process while ensuring you receive the most favorable terms possible.

Yes, financing used equipment is definitely possible and often a cost-effective strategy for manufacturers. Most lenders will finance used equipment that's in good condition and has a reasonable useful life remaining. The equipment's age, condition, and expected remaining lifespan will impact the terms, including interest rates and loan duration. Generally, lenders prefer equipment less than 10 years old, though exceptions exist for certain types of machinery with longer useful lives. Our team can help you navigate the specific requirements and find optimal financing solutions for your used equipment needs.

Make Today

Profitable

Unlock hidden tax savings within your manufacturing facility. Contact Schapira CPA to explore how a Cost Segregation Study can accelerate deductions and boost your cash flow.

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