Detailed Cash Flow Analysis for a Grain Processor
Case study published on November 15, 2023
Sector
Grain Processing
Analysis Period
Q3 2022 - Q2 2023
Analysis Purpose
Optimizing Operational Liquidity
Cash Flow Challenges Identified
The company, a medium-sized grain processor, faced significant liquidity volatility despite growing revenue. Our analysis highlighted three critical points:
- Payment Gap: Suppliers required payment in 30 days, while major clients paid in 60-90 days.
- Costly Storage: Seasonal purchasing of raw materials to take advantage of low prices tied up working capital for months.
- Lack of Forecasting: The absence of a 90-day cash flow forecast model left managers unable to anticipate liquidity shortfalls.
Approach and Tools Used
We implemented a three-stage analysis framework, based on reports and statistics from the AgroCashFlow platform:
1. Benchmarking with Sector Data
We compared the company's DSO (Days Sales Outstanding) and DPO (Days Payable Outstanding) with averages in the grain processing industry, identified in our database.
2. Price Forecast Model
We integrated our forecasts for wheat and corn prices for the next two quarters to optimize the timing of raw material purchases.
Key Result
Within 6 months, the company managed to reduce its cash conversion cycle by 22 days and release over 15% of the working capital tied up in inventory, without affecting production. Implementing a weekly cash flow report became standard.