Working Capital in Finnish Manufacturing — Extended, Easy-to-Read Study
We group firms by size, show how cash metrics change as companies grow, explain why, and provide tools you can use tomorrow. Plain language, deeply practical, and data-driven.
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Executive Summary
TL;DR: As firms grow, inventory days fall the most; payables stretch a bit; receivables stay flat. The safe, fast cash lever is inventory.
What we did. We grouped Finnish manufacturing firms into five turnover bands (€10–15m, €15–30m, €30–50m, €50–100m, €100m–€1bn) and compared five working-capital metrics using each firm’s 2021–2023 average: DSOi, DPOi, DIOi, CCCi, NOWC%i.
Receivables (DSO)
≈ 46–48 days
Flat across sizes.
Payables (DPO)
≈ 51 → 61 days
Larger firms keep cash longer.
Inventory (DIO)
≈ 171 → 122–125 days
Scale + planning maturity.
Context — 2021–2023 reshaped the cash picture
TL;DR: Shocks forced higher stocks then normalization; financing got pricier. Smart targets matter.
Supply shocks, price swings, and higher financing costs forced many manufacturers to hold extra stock, then normalize. Payment discipline and supplier relationships were stress-tested. In this environment, size-aware targets help unlock cash safely while protecting service and supply.
Scope & Research Questions
TL;DR: Compare metrics by size, explain the gaps, and give a 90-day plan.
- Scope: Finnish manufacturing (NACE C), 2021–2023, five turnover bands.
- Q1: Do DSO, DPO, DIO, CCC, NOWC% differ by size band?
- Q2: If yes, why? What real-world mechanisms explain the gaps?
- Q3: What actions shorten the cycle in 90 days without harming service?
Data & Cleaning — apples to apples
TL;DR: Standard definitions + outlier trimming = targets you can trust.
Coverage
- Manufacturing firms headquartered in Finland.
- Years: 2021–2023 (each firm contributes its 3-year average).
- Turnover bands: €10–15m; €15–30m; €30–50m; €50–100m; €100m–€1bn.
Metrics
- DSO = AR ÷ Revenue × 365
- DPO = AP ÷ COGS × 365
- DIO = Inventory ÷ COGS × 365
- CCC = DSO + DIO − DPO
- NOWC% = (AR + Inventory − AP) ÷ Revenue × 100
Obvious outliers trimmed to practical bounds; focus on operating components.
Method — how we compared groups
TL;DR: Average each firm across 3 years, then average by size. Differences are descriptive, not causal.
For each firm: calculate a 3-year average per metric, then average by size band. Run a basic group-difference check (like ANOVA) to see if bands differ meaningfully. Interpret direction/size of differences using operations and finance logic.
Results — what changes with size
TL;DR: DIO falls most (main lever), DPO increases (extra float), DSO flat.
Receivables (DSO): ~46–48 days across all bands
Meaning: collections speed is about daily discipline, not size. Keep invoicing accurate, solve disputes fast, and maintain a steady reminder cadence.
Payables (DPO): ~51 → ~61 days as firms grow
Meaning: larger firms keep cash longer, within agreed terms, thanks to standardized contracts, clean approvals, and buyer power.
Inventory (DIO): ~171 → ~122–125 days as firms grow
Meaning: the main driver. Planning maturity (clean lead times, MOQs, ABC/service targets) drops stock days without hitting service.
Cash conversion cycle (CCC): ~168 → ~112 days
Improvement is mostly inventory (~46 days), with the rest from a wider supplier-funded window (~10 days). Receivables steady; inventory + payables do the heavy lifting.
Why these patterns show up
TL;DR: Inventory responds to execution fixes; payables to governance; receivables to hygiene.
Inventory is execution-sensitive
- Realistic lead times and MOQs, corrected master data.
- ABC by variability & margin; safety stock derived from variability.
- Smoother production schedules; faster slow/obsolete cleanup.
Payables reflect governance
- Standard terms, calendarized payment runs, clean approvals.
- On-time payments to protect supply; selective early-payment discounts when ROI > cost of cash.
Receivables are hygiene
- Invoice accuracy, proof-of-delivery discipline, dispute turnaround.
- Polite, steady reminders; clear escalation paths; risk-based limits.
Benchmarks & practical targets
TL;DR: Inventory first (−5–15% in 90 days), then payables standardization, keep receivables tidy.
- DSO: stay at/below band mean; audit billing accuracy & disputes if above.
- DPO: align to band mean through standardized terms; extend only where risk is low.
- DIO: aim −5–15% in 90 days via ABC/safety stock/lead time & MOQ fixes, then another −10–20% in 6–12 months.
- CCC & NOWC%: track weekly; they fall as DIO falls (and DSO−DPO stays stable or more negative).
Case Snapshots — short, specific, and comparable
TL;DR: Three real patterns: inventory cuts, payables discipline, and receivables hygiene deliver fast cash without hurting service.
Three quick reads. Same structure: challenge → key actions → results.
Machinery OEM (Turnover €45m) — DIO −18%, CCC −22 days
Challenge: Slow WIP, long component lead times, growing E&O list.
- Mapped real supplier lead times & minimums; updated master data.
- ABC by variability & margin; service targets by class.
- Weekly E&O review; phased liquidation with “no-rebuy” rule.
Results (90 days):
- DIO from 148 → 121 (−18%), CCC −22 days.
- €3.1m cash released; on-time delivery unchanged.
- Expedites −27% due to cleaner planning.
Metals & Fabrication (Turnover €22m) — DPO +9d, DSO −4d
Challenge: Paying early to “be a good customer”, inconsistent invoicing.
- Standard terms by supplier tier; payment runs calendarized.
- Invoice accuracy checklist; POD captured to order file.
- Reminder cadence automated; dispute SLAs defined.
Results (120 days):
- DPO 49 → 58 (+9d), DSO 52 → 48 (−4d).
- Net trade credit improved by 13 days; CCC −13 days.
- €1.2m ongoing float benefit; supplier OTIF stable.
Electronics Assemblies (Turnover €95m) — DIO −22%, E&O −60%
Challenge: Component volatility, obsolescence risk.
- Vendor-managed inventory for A-chips; dual-sourcing for criticals.
- Postponed configuration; smaller launch batches.
- Monthly E&O gate; price markdown playbook.
Results (6 months):
- DIO 162 → 126 (−22%); E&O −60% vs. prior year.
- €7.8m cash unlocked; service fill-rate unchanged.
Gap Mini-Calculator — cash you can free vs. your size band
TL;DR: Enter your numbers, we compare to your band mean, and show cash you can free (to average, not best-in-class).
Enter your revenue, COGS %, and current DSO/DIO/DPO.
Mapped Size Band
—
Cash Release Potential (to band mean)
—
CCC Change (approx)
—
Deep Dive — Sub-sector patterns (plain English)
TL;DR: Adjust targets slightly by mix, but start from size-band means.
Machinery & Equipment
- High-value, engineered items; longer build times.
- DIO: moderate; focus on WIP controls and realistic lead times.
- DSO: milestone billing; protect invoice evidence.
- Action: tighten stage-gate to billing; use component Kanbans for long-lead parts.
Metals & Fabrication
- Material-heavy; yield variances matter.
- DIO: watch raw steel/plate safety stocks; variability-based buffers.
- DPO: predictable runs; bargain for calendarized terms.
- Action: clean BOMs/yields; right-size coils/pack sizes to real usage.
Electronics & Assemblies
- Component volatility; obsolescence risk.
- DIO: strict E&O review, vendor-managed options.
- Action: postpone configuration; dual-source critical chips.
Wood, Paper & Packaging
- Seasonality and bulky stock.
- DIO: segment by demand shape; don’t over-protect low-margin SKUs.
- Action: service-based buffers; clean slow-mover liquidation path.
Chemicals & Plastics
- Batching constraints; shelf-life.
- DIO: batch optimization and MOQ negotiations deliver big wins.
- Action: right-size campaign lengths to actual demand variability.
Food & Beverage
- Expiry risk; promotions create bursts.
- DIO: joint planning with key retailers; freshness windows.
- Action: event-based safety stocks and post-promo rundown rules.
Deep Dive — Export exposure & FX realities
TL;DR: Longer lead times inflate DIO; clean docs protect DSO; align DPO currency to stabilize net trade credit.
- Lead time inflation: ocean/rail adds days; use this in safety stock math, not guesswork.
- Currency terms: match receivable and payable currencies when possible to reduce net exposure.
- Document accuracy: export docs affect on-time payment; invoice on shipment with complete files.
What to watch
- Forecast error by export market; set buffers where variance is real.
- Carrier reliability; reconsider MOQ/pack sizes for export SKUs.
- FX clauses in contracts; define who bears exposure.
Fast fixes
- Invoice completeness checklist; zero-defect docs.
- Split shipments for long-lead items to de-risk launch.
- Align DPO currency/basis with DSO to stabilize net trade credit.
Deep Dive — Cost of cash & why it changes your choices
TL;DR: Inventory cuts pay twice (cash + carrying-cost save). Discounts beat borrowing if APR < discount return.
| Move | Cash effect | When it’s attractive | Guardrail |
|---|---|---|---|
| Reduce DIO by 10% | One-time cash release + lower carrying cost | Always, if service protected | Monitor fill-rate, expedite rate |
| Extend DPO by +10 days | Ongoing float benefit | When supplier risk is low | On-time within terms; no stretching |
| Shorten DSO by −5 days | Ongoing float benefit | When invoice accuracy is fixable | Don’t trade price for DSO blindly |
| Take 2/10 net 30 | ~36%+ annualized return | When your cost of cash is lower | Check delivered quality/service |
Quick scenario — cash & ROI from small changes
Cash from DIO cut (one-time)
—
Annual interest saved
—
Float from +DPO (ongoing)
—
Rule of thumb: 10% DIO reduction often funds several months of improvement work by itself.
Quartile benchmarks — find your position
TL;DR: Means are targets; quartiles show relative rank. If you’re above Q3 (worse), start there.
| Metric | Band | Q1 (best 25%) | Median | Q3 (75%) |
|---|
Sensitivity & scenarios — what changes CCC fastest?
TL;DR: −5 days in DIO is usually the safest and quickest to sustain.
Sensitivity (per 5-day change)
- DIO −5 days: CCC −5 days, NOWC% down.
- DPO +5 days: CCC −5 days—use where supply risk is low.
- DSO −5 days: CCC −5 days—requires invoice/dispute fixes.
In practice, −5 days DIO is often easier/safer to sustain than −5 DSO.
Scenario ideas
- Seasonal peak: pre-build with liquidation plan; monitor weekly.
- New product: small launch batches; scale after demand is real.
- Supplier change: temporary buffers; lock terms early.
30/60/90-day improvement plan
TL;DR: 0–30: baseline + quick wins. 31–60: structural fixes. 61–90: stabilize + scale.
Days 0–30: Baseline & quick wins
- Rebuild ABC by variability & margin; set service levels.
- Compute safety stocks using actual variability (not gut feel).
- Freeze & plan dead stock liquidation.
- Standardize supplier terms; map approvals to goods-receipt.
- Receivables hygiene review: invoice accuracy, POD, disputes.
Days 31–60: Structural fixes
- Fix lead times and MOQ/pack sizes; align min/max to usage.
- Calendarize payments; evaluate discounts vs cost of cash.
- Automate dispute workflows and reminder cadence.
Days 61–90: Stabilize & scale
- Weekly DIO/CCC dashboard; exception handling.
- Monthly E&O cleanup; protect service KPIs.
- Track DSO−DPO (net trade credit); keep stable or more negative.
Where CapAid helps
- Receivable ACE: policy automation, reminders, negotiation aids.
- Inventory: segmentation, buffer math, master-data cleanup, S&OP cadence.
- Payables: term standardization, approval flows, discount ROI.
Risks & guardrails
TL;DR: Protect service, supply, and relationships; codify the new rules.
- Service risk: set service targets before cutting stock; monitor fill-rate & expedites.
- Supply risk: extend terms only where supply is robust; keep on-time payments.
- Customer risk: don’t loosen credit terms without payback; protect invoice quality.
- Org risk: codify new rules; use standard work and review cadence.
Charts & interactive benchmarks
TL;DR: Click the metric tabs. Labels say “lower/higher is better” to avoid confusion.
Bands: €10–15m, €15–30m, €30–50m, €50–100m, €100m–€1bn.
Most of the improvement is from fewer inventory days; the rest is from a larger supplier-funded window (DSO−DPO).
If you’re worse than your band’s averages: Inventory → Payables → Receivables hygiene.
Band means (2021–2023) — table & CSV
TL;DR: Pick your turnover band and compare your numbers to the means. Start with the biggest gap.
| Metric | €10–15m | €15–30m | €30–50m | €50–100m | €100m–€1bn |
|---|---|---|---|---|---|
| DSO (days) | 48.23 | 47.53 | 45.68 | 48.37 | 46.82 |
| DPO (days) | 51.27 | 50.70 | 55.52 | 60.92 | 59.54 |
| DIO (days) | 171.17 | 137.55 | 135.68 | 121.84 | 125.45 |
| CCC (days) | 168.13 | 134.38 | 125.84 | 109.28 | 112.52 |
| NOWC (% of sales) | 25.8 | 23.6 | 22.8 | 21.2 | 20.8 |
| Net Trade Credit (DSO−DPO, days) | -3.04 | -3.17 | -9.84 | -12.56 | -12.93 |
Formulas & definitions
- DSO = Accounts Receivable ÷ Revenue × 365
- DPO = Accounts Payable ÷ COGS × 365
- DIO = Inventory ÷ COGS × 365
- CCC = DSO + DIO − DPO
- NOWC% = (AR + Inventory − AP) ÷ Revenue × 100
- Net Trade Credit = DSO − DPO
Glossary — quick meanings
DSO — Days Sales Outstanding
Average days customers take to pay you. Lower is better.
DPO — Days Payables Outstanding
Average days you take to pay suppliers (within agreed terms). Higher is better if supply risk is low.
DIO — Days Inventory Outstanding
Average days stock sits before it’s used or sold. Lower is better.
CCC — Cash Conversion Cycle
DSO + DIO − DPO. Lower means faster cash cycle.
NOWC% — Net Operating Working Capital %
How much cash is tied in AR + Inventory − AP compared to sales. Lower is better.
FAQ — understandable, practical answers
TL;DR: Use band means for targets; protect service and supplier trust while freeing cash.
Is this causal?
No. It’s descriptive. It shows what’s normal by size and where to focus. It’s great for targets, not for proving cause-and-effect.
Why is DSO flat across sizes?
Because DSO is mostly hygiene and customer mix, not size. Bigger companies don’t automatically collect faster.
Why does DIO fall with size?
Planning maturity: better data, realistic lead times/MOQs, segmentation, and steady cleanup of slow/obsolete items.
Is extending DPO always good?
No. Only when supply risk is low and terms are agreed. On-time within terms preserves reliability.
What’s the one number to watch?
CCC weekly, and DSO−DPO monthly. CCC should fall as DIO falls; DSO−DPO should be stable or more negative.
What’s a realistic 90-day target?
−5–15% DIO via ABC/safety-stock/lead time & MOQ fixes, with service protected. That alone can release meaningful cash.