The counter-intuitive story of a logistics and distribution firm whose phenomenal sales success created an immediate and severe cash flow crisis, and how strategic intervention secured their liquidity.
1 The Challenge: A Liquidity Crisis Driven by Sales
The client, a logistics and distribution firm we'll call Global Distribution Solutions (GDS), experienced a rapid and unexpected surge in demand. To capture this market share, the sales team offered generous credit terms (Net 60 to Net 90) to secure large, high-value corporate contracts.
While this boosted the company's Accounts Receivable (AR) to record levels, it created a devastating pinch on working capital. GDS was obliged to pay its suppliers and operational costs on much shorter terms (Net 30). The result was a widening gap in the Cash Conversion Cycle (CCC), where cash was leaving the company 30-60 days before revenue arrived.
2 The Diagnosis: The Unhealthy Cash Conversion Cycle
A specialized advisory team immediately diagnosed the classic "Growth Trap." A detailed analysis of the company's working capital metrics confirmed the severity of the problem.
*Credit Policy Drift: The sales team had no formal credit approval mechanism and was granting 90-day terms without assessing risk.
3 The Strategy: Bridging the Liquidity Gap
Phase 1: Collection Acceleration
The firm implemented a strict, four-tier credit policy. New high-risk clients were limited to Net 30 or required a small upfront deposit. Simultaneously, they automated the invoicing and collections process, deploying follow-up systems at the 15, 30, and 45-day marks, complete with early-payment discount incentives (2% Net 10).
Phase 2: Supplier Synchronization
Armed with data showing GDS's new stability and long-term contract growth, the advisory team successfully renegotiated terms with GDS's three largest suppliers, extending their average payment period from 30 days to 60 days. This required presenting a detailed, transparent cash flow forecast that mitigated the suppliers' risk.
4. The Result: Liquidity & Accelerated Growth
The reforms had an immediate, stabilizing effect. Within six months, GDS's financial health was fundamentally transformed:
This turnaround means GDS now receives cash 10 days before they have to pay their suppliers, completely eliminating the internal funding gap. The company achieved the twin goals of aggressive sales growth and robust financial liquidity, allowing them to confidently scale operations without fear of a self-inflicted cash crisis.