How to Build a Working Capital Review Process for Your Limited Company

Why a formal review process matters

Working capital pressure rarely arrives without warning. The signs are almost always visible in the data weeks before they become a liquidity problem — a debtor aging report that is stretching, a creditor balance that is concentrating in older buckets, a stock level that is rising without a corresponding increase in orders. A structured monthly review exists to surface these signals early.

Many SME directors review individual elements — the bank balance, the debtors — but not all four working capital components together and in sequence. The interaction between them is where the insight lies: a company with a healthy debtor book but rapidly extending creditor days may be using slow debtor collections as a proxy for a cash gap that needs a different solution.

Set up the right reports before the meeting

The review needs four inputs produced before the meeting, not in it. Debtor aging report: all outstanding invoices by customer, aged into current, 1–30 days overdue, 31–60 days, 61–90 days and 90-plus days. Creditor aging report: the same structure for your purchase ledger. Stock or WIP valuation: total value by category, ideally with days-of-stock calculated. Cash position: actual bank balance with a 4-week forward projection.

These reports should be produced from your accounting system the day before the review so they are current. A review based on reports that are two weeks old is a review of the past, not a tool for managing the present.

Structure the review itself

Work through each element in order. Debtors first: what is the total overdue balance, which customers account for more than 20% of the overdue total, and what actions are already in progress? Creditors second: are there suppliers being paid late that should not be, and are any creditors at risk of stopping supply? Stock or WIP third: is there slow-moving stock that is consuming cash without generating sales, or WIP that should have been invoiced and has not been?

Cash last — by which point you should already understand the drivers of the cash position from the preceding three conversations. The cash review then becomes about forward management: what is the projected balance in four weeks, and does it require any action this week?

Produce and track actions

Every working capital review should end with a brief written action log: who is responsible for chasing the three largest overdue debtors, whether a specific supplier payment needs to be brought forward to protect a supply relationship, and whether any stock write-down or WIP invoicing needs to happen before month end.

At the next review, start by reviewing the prior actions before looking at new data. This disciplines the process and makes the review a genuine management tool rather than a reporting exercise. Actions that repeatedly roll forward without completion are a signal either that the action owner lacks capacity or that the task itself needs to be escalated.

Escalating to the board or to lenders

If the working capital review consistently shows deteriorating trends across more than one element — debtors stretching and creditors concentrating simultaneously, for example — that pattern warrants board-level attention and should be escalated promptly. Do not wait for the trend to become a crisis before surfacing it.

If you have a relationship with a commercial lender, sharing your working capital metrics proactively — particularly when you are drawing on a facility — builds confidence in your management of the business. Lenders who see regular, structured reporting are more likely to respond constructively if you need to discuss facility terms.