In many SMEs, cash flow tensions do not necessarily come from a lack of profitability. They often stem from a lack of visibility on the actual flows of the company: customer payment terms, stock levels, cash outflow rates, or the ability to anticipate financing needs.
A company can be profitable while consuming a lot of cash.
It is precisely for this reason that managing the Working Capital Requirement (WCR) becomes a strategic issue for the manager. The role of the outsourced CFO is not only to analyze the numbers but to transform this data into management tools that allow for anticipation rather than reaction.
For the SMEs we support, the first actions to optimize the WCR produce tangible effects in 60 to 90 days. The fastest lever: accounts receivable. A few days recovered on the DSO (Days Sales Outstanding) immediately frees up several tens of thousands of euros in cash — without changing software, without hiring, without restructuring.
Laurent Blanchet: "Many SMEs track their revenue or their results... but far fewer track their actual cash consumption. The WCR is often one of the main blind spots in financial management. The role of the outsourced CFO is precisely to provide visibility and enable the manager to anticipate cash tensions before they become critical."
What your accountant doesn't tell you about your WCR
This is the topic that most articles avoid. Your accountant produces your balance sheet. They tell you if you are profitable. They do not tell you if you will run out of cash in 6 weeks.
Why? Because accounting looks in the rearview mirror. It records what has happened — not what will happen. The working capital requirement (BFR) is a forward-looking indicator. It measures the gap between what you have committed (purchases, salaries, expenses) and what you have collected. And this gap changes every week.
An annual balance sheet tells you that your BFR was 45 days as of December 31. It does not tell you that it was 78 days in March during your peak activity — and that it was precisely at that moment that your cash flow almost broke.
This is the first thing that Advanced Conseil sets up: a weekly cash flow forecast that calculates your real BFR in real time, not at M+6. Not because your accountant is doing their job poorly. But because it is not their profession.
In many companies, growth mechanically increases financing needs: rising inventory, longer customer payment terms, hiring, investments, or increased business volume.
Without structured management of the BFR, a small business can quickly find itself under cash flow pressure despite being profitable.
The real challenge is therefore to obtain reliable visibility on cash flows in order to anticipate financing needs and secure the company's growth.
Structuring the management of the BFR with the right tools
In many small businesses, tracking the BFR remains very artisanal: Excel spreadsheets, scattered data, or manually reconstructed reports.
This organization significantly limits the leader's ability to anticipate cash flow tensions.
Advanced Conseil supports SMEs in implementing digital solutions that allow real-time tracking of:
- collections,
- customer payment terms,
- supplier flows,
- cash flow forecasts,
- and the main working capital indicators.
Tools like Pennylane or Odoo notably allow for the centralization of financial and operational data to obtain a much smoother and more usable view of the company's cash.
The 3 components of working capital that 80% of SME leaders confuse
DSO — Days Sales Outstanding
DSO (Days Sales Outstanding) measures the number of days between your invoicing and your actual collection. A DSO of 55 days means that on average it takes you 55 days after issuing an invoice to receive payment.
What most SMEs do not know: their actual DSO is consistently higher than their contractual DSO. You invoice at 30 days — your clients actually pay at 48 days. This 18-day gap, on a revenue of 3 million euros, represents about 150,000 euros of cash permanently tied up.
Formula: DSO = (Accounts Receivable / Annual Revenue) × 365
DIO — Days Inventory Outstanding
DIO (Days Inventory Outstanding) measures how many days your inventory remains tied up before being sold or used in production. A high DIO means capital is tied up that does not generate revenue.
For an industrial SME with a DIO of 60 days and a revenue of €5M, the inventory represents about €820,000 of cash tied up. Reducing the DIO by 10 days frees up about €140,000.
Formula : DIO = (Average Inventory / Cost of Sales) × 365
The DPO — accounts payable turnover period
The DPO (Days Payable Outstanding) measures how many days it takes you to pay your suppliers. Unlike the DSO and DIO, a high DPO is favorable to your cash flow — you keep the cash longer.
The fundamental relationship : BFR = DSO + DIO - DPO
If you have a DSO of 55 days, a DIO of 40 days, and a DPO of 30 days, your BFR represents 65 days of revenue. On a revenue of €4M, this is about €710,000 of cash permanently immobilized in your operating cycle.
Reference table : Normal BFR by industry sector
| Sector | Average DSO | Average DIO | Average DPO | BFR in days of revenue |
|---|---|---|---|---|
| Manufacturing industry | 55–70 days | 45–75 days | 40–55 days | 60–90 days |
| Trade / Distribution | 45–60 days | 30–60 days | 35–50 days | 40–70 days |
| B2B Services | 40–60 days | 0–10 days | 20–35 days | 20–45 days |
| Construction / Building | 60–90 days | 15–30 days | 45–60 days | 30–60 days |
| Retail trade | 0–15 days | 30–60 days | 30–45 days | 0–30 days |
| E-commerce | 0–5 days | 20–45 days | 30–60 days | Negative working capital possible |
If your working capital exceeds the upper range of your sector, you have an active problem. If your working capital increases faster than your revenue, you have a ticking time bomb.
Why optimizing your working capital can degrade your supplier relationships — and how to avoid it
When you seek to improve your working capital, the first reflex is to extend your supplier payment terms. It makes financial sense — but it is a strategic mistake if it is your only lever.
A supplier who suddenly goes from 30 to 60 days of payment terms without prior negotiation will react: they will adjust their prices at the next opportunity, they will move you down their priority list during shortages, they will tighten their conditions. You improve your accounting working capital and you degrade your purchasing conditions.
The right sequence that Advanced Conseil applies: we first tackle DSO (customer lever, with no impact on suppliers), then DIO (inventory lever, internal), and only then DPO — in a negotiated mode, with counterparty agreements. A supplier to whom you offer a volume commitment in exchange for 15 additional days will be much more receptive than a supplier to whom you announce that you will pay later.
The 3 levers to quickly reduce working capital — in the exact order
Lever 1 — DSO: immediate impact in 30 to 60 days
It is always the first lever activated. It does not require external negotiation, the results are visible quickly, and it has no negative side effects on business relationships.
What we implement concretely on Odoo 16/17/18/19:
- Automation of reminders J+30, J+45, J+60 — configured once, active permanently. For a small business with 200 active clients, this represents 4 to 6 hours per month recovered from manual tasks.
- Weekly dashboard of collections: overdue invoices by client, amount, number of days overdue, payment history.
- Identification and handling of disputes: 20 to 30% of payment delays hide an unresolved dispute. Addressing them releases cash immediately.
Observed result on supported SMEs: DSO reduced by 8 to 18 days on average in the first 90 days. For a small business with €3M in revenue, 10 recovered days represent approximately €82,000 in released cash.
Lever 2 — The DIO: impact in 60 to 90 days (industry and trade)
In industry and trade, inventory often represents the heaviest working capital item. On Odoo, Advanced Conseil configures the tracking of turnover by category with automatic alerts as soon as a reference exceeds a defined DIO threshold.
In practice, 15 to 20% of references often represent 60 to 70% of immobilized stock — with a turnover lower than half the average. Actions: stop replenishments on low-turnover references, more frequent deliveries in small quantities, controlled destocking of obsolete references.
Lever 3 — The DPO: negotiated impact, not imposed
This lever is activated last and only in negotiated mode. The target: an additional 10 to 15 days on the 3 to 5 main suppliers, with a counterpart (volume commitment, systematic on-time payment, supply preference).
A supplier to whom you always pay on time is much more likely to accept a negotiated extension of deadlines than a supplier who regularly chases you. The reputation of a good payer is a real financial asset.
Client case: Industrial SME €15M turnover — €400,000 of cash released in 6 months
We supported an industrial SME generating approximately €15M in revenue, facing strong growth but with cash flow under constant pressure. The company was profitable — positive EBITDA, full order book. But the manager discovered their cash flow issues at D+3 or D+5 instead of anticipating them 6 to 8 weeks in advance.
The initial diagnosis reveals:
- Actual DSO: 68 days for a contractual DSO of 45 days — a gap of 23 days, or approximately €940,000 in permanently overdue receivables.
- DIO: 72 days, with 18% of references generating 65% of the immobilized stock.
- No cash flow visibility beyond 10 days.
- Manual customer reminders, irregular, without systematic follow-up.
Actions deployed over 90 days:
- Cash flow forecast for 13 weeks on Odoo — operational in 15 days.
- Automation of customer reminders — DSO reduced from 68 to 51 days in 90 days.
- Stock audit by category — identification of the 22 references to be prioritized for destocking.
- Negotiation with the 3 main suppliers: moving from 30 to 45 days of average lead time.
Result after 6 months: Working capital reduced from 68 to 49 days of revenue, representing approximately €400,000 of cash released. Cash flow tensions have ceased despite an 18% growth in revenue during the period. The manager now has a 13-week visibility updated every Friday in 25 minutes.
The outsourced CFO: a management partner for the manager
The role of the outsourced CFO is not just to optimize a few financial indicators. Its main objective is to help the manager steer their business with greater visibility: cash flow, margins, profitability, financing, or investment capacity.
The working capital then becomes a true anticipation tool allowing for quicker decision-making and securing the company's growth.
Conclusion Optimize working capital: a key issue in managing SMEs
Managing working capital should no longer be seen as a simple accounting or administrative topic. It becomes a strategic issue for managers who wish to secure their cash flow, finance their growth, and improve their financial visibility.
At Advanced Conseil, we combine financial expertise, digital tools, and operational management to help SMEs better anticipate their financing needs and manage their activities with reliable and actionable real-time data.
The goal is not just to improve a few financial ratios. The challenge is mainly to enable the manager to regain visibility and make better decisions.
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Frequently asked questions about SMEs' working capital
My working capital is increasing while my revenue is too — is this normal?
Yes, to a certain extent. A growth in revenue mechanically leads to an increase in working capital. The problem arises when your working capital increases faster than your revenue. If your revenue grows by 20% and your working capital by 35%, you have a management issue. Advanced Conseil calculates this ratio every month to detect this drift before it becomes a crisis.
Is factoring a solution to improve my working capital?
Factoring instantly improves your cash flow but does not solve the underlying problem — your DSO. You sell your receivables at 85-90% of their value, resulting in a real financial cost of 2 to 4% of the revenue assigned annually. It is a financing solution, not an optimization. Advanced Conseil recommends addressing the DSO first through reminders — and only using factoring if the structural DSO of your sector is intrinsically long (construction, aerospace).
Do you need to be on Odoo to optimize your working capital with Advanced Conseil?
No. Advanced Conseil builds management tools on your existing ERP — Sage, Cegid, Pennylane, or others. On Odoo 16/17/18/19, the setup is faster and reminders are natively automated.
How long before seeing the first results on working capital?
The first actions on DSO produce visible effects in 30 to 45 days. Optimizing DIO takes 60 to 90 days. A structural reduction of working capital by 15 to 25 days of revenue is built over 3 to 6 months.
What is a normal working capital for an industrial SME?
The industry benchmark is 60 to 90 days of revenue for the manufacturing sector (see table above). But the right indicator is not the absolute level — it's the trend. A stable working capital requirement at 75 days is less concerning than a working capital requirement that goes from 60 to 80 days in 6 months without revenue growth.
Advanced Conseil has been supporting SMEs in managing their working capital and operating cycle for over 20 years. Our approach is operational: we set up a weekly management system with you that your teams take ownership of — not an annual report. Based in Levallois-Perret (Hauts-de-Seine), just a stone's throw from the Anatole France metro.
BFR négatif : est-ce toujours une bonne nouvelle ?
Most articles tell you that a negative working capital requirement is ideal. This is false in some cases.
A negative working capital requirement means that your suppliers are financing you: you collect before you pay. This is the model of large retail. For an e-commerce SME or a subscription business with upfront payment, it is indeed positive.
Mais pour une PME industrielle ou de services B2B, un BFR soudainement négatif peut signaler que vos clients vous demandent des acomptes parce qu'ils n'ont plus confiance en votre capacité à livrer. Dans ce cas, le BFR négatif est un signal d'alerte, pas une performance financière.
Three options to move forward: