Working capital is the difference between current assets and current liabilities. It measures the operational liquidity available to fund day-to-day activities, including inventory, receivables, and short-term payables.
Where contract terms affect working capital
Payment terms, rebate settlement cycles, and volume commitments all affect working capital dynamics. Extending payment terms without offsetting adjustments transfers working capital to the supplier; accelerating rebate claims accelerates cash conversion.
The visibility contribution
Aged supplier entitlement balances (a Contract Performance Management output) directly affect working capital planning. Finance functions that see this balance in real time can time claim filings against working capital needs.
