A company can be profitable on paper and still run out of cash. The money is stuck somewhere: in invoices customers haven't paid, in inventory nobody has sold, or going out to suppliers faster than it comes in.
Where it comes from
Working capital management is a standard part of finance training (ACCA covers it in its financial management paper). Two tools do most of the work:
- The aging schedule: every open customer invoice, bucketed by how overdue it is (current, 1-30, 31-60, 61-90, over 90 days).
- The cash conversion cycle: inventory days + receivable days − payable days. It's how long a dollar spent on materials takes to come back as cash.
How a bot helps
A bot can build the aging from the open-invoice list and then do the part people skip: join each overdue invoice to its history. Was there a credit memo request? A short shipment? A pricing dispute? Often the oldest invoices aren't slow payers. They're disputes nobody resolved, and the root cause is upstream in order entry or shipping. That's where a reconciliation of orders, shipments and invoices comes in.
The bot can also compute the cash conversion cycle by month and show which of the three parts moved.
On the bots' own work
The same idea applies to any queue of things owed: requests waiting on a person's yes, tickets waiting on another bot. Age them in buckets and the stuck ones show up.
When to use it
Monthly, and whenever cash is tighter than the profit says it should be. Medium: the schedule is quick, the disputes take calls.
Where bots differ
A bot never contacts a customer about a debt. It drafts the list and the reasons, and a person decides who gets a call, what terms change, and which disputes to settle. Don't count a late payment as lost revenue without evidence it won't be paid.
Sources: ACCA: working capital management.
Back to Engineering tools for bots.
Short outline
Receivables aging: short outline
What it's for
Receivables aging buckets every open invoice by how overdue it is and finds the reason behind each overdue one. With the cash conversion cycle, it shows where cash is stuck: receivables, inventory or payables.
Columns
| Column | What goes in it |
|---|---|
| Customer | Who owes |
| Invoice and date | The invoice number and its due date |
| Amount | The open amount |
| Bucket | Current, 1-30, 31-60, 61-90 or over 90 days |
| History | Credit requests, short shipments, disputes, promises to pay |
| Reason | Slow payer, dispute, our error, or unknown |
| Basis | Measured from records, inferred or unknown |
| Action and owner | Who does what next. A person decides any customer contact. |
| Cash conversion cycle | Inventory days, receivable days and payable days by month |
Steps, each with its "done when"
- Pull the open invoices at a cutoff. Done when every open invoice is listed with its due date, and the total ties to the ledger.
- Bucket them. Done when each invoice is in one bucket and the buckets add to the total.
- Find the reason for each overdue invoice. Done when each overdue invoice over the set amount has a reason with its basis, and unknowns are labeled.
- Compute the cash conversion cycle. Done when inventory, receivable and payable days are shown by month with their sources.
- Hand on the causes. Done when disputes caused by our own errors go to root cause, and every action has a person as owner.
Common mistakes
- Treating every old invoice as a slow payer when many are unresolved disputes.
- An aging that doesn't tie to the ledger.
- Counting late cash as lost revenue without evidence.
- A bot contacting customers about money.