Revving up the working capital cycle

IF YOU ASK ROB JOSSART ABOUT THE cheapest and best source of cash for a business, he won't name banks or investors.

The right answer, he'll tell you, is the efficient management of the working capital cycle.

You could think of it as keeping the leakage out of a company's financial vascular system by paying close attention to its components, namely inventory, receivables, payables, and cash.

Jossart puts that view into practice as CFO of Martin Petersen Co. Inc., an 86-year-old mechanical contracting firm with 280 employees, headquartered in Kenosha. To evaluate how well current accounts are working, he consults regularly with Peter Sinsky, a partner in the Kenosha CPA office of Clifton Gunderson LLP.

Working capital is getting extra attention from many companies these days, says Sinsky.

One reason for the renewed interest is that the era of cheap money now seems to be drawing to a close. When commercial loans could be had for four percent, dipping into a bank line of credit was a cheap and easy fix when the working capital cycle got sluggish. Now, as interest rates creep up, there's more incentive to keep the quote-to-cash cycle more finely tuned.