Check whether project working capital really returns as cash at the end

A financial model may invest working capital at the start and release the same amount when the project ends. That can be a useful simplified assumption, but a real project needs a route from its closing balances to cash. Customers must pay, stock must be sold or returned, and remaining supplier obligations must be settled.

ACCA's appraisal guidance treats changes in working capital as cash movements and demonstrates a complete release at the end of its example. For a business decision, confirm whether the example's recovery assumption fits the actual assets and liabilities. The model should not manufacture a receipt merely because its final operating column has arrived.

List the receivables, inventory and relevant operating liabilities remaining when new activity stops. Use the same definitions as the project's earlier working-capital calculations. Separate other balances, such as refundable deposits, if they were modeled outside that measure. Give each category an expected settlement method and date.

In a hypothetical closing position, receivables are $40,000, inventory is $30,000 and trade payables are $20,000. The reported trade working-capital balance is $50,000. Suppose expected customer collections are $36,000 and inventory produces $22,000 of net sale cash, while all $20,000 of payables must be paid. Expected net recovery is $38,000, before other closure costs or taxes.

The $12,000 difference from the closing balance is not fixed by moving the recovery date. It reflects the assumed economic recovery. Have the accounting team separately assess any reporting consequences; the planning schedule's purpose is to show supported cash outcomes without implying a journal-entry conclusion.

Choose a consistent modeling approach. A direct cash schedule may already contain the final customer receipts, stock sales and supplier payments. Adding a separate full working-capital release on top would duplicate some or all of that cash. An indirect project model may instead use operating results and changes in working capital to reach cash.

Trace one remaining invoice through the final operating period and the runoff. Identify where its revenue, receivable and collection appear. Repeat the exercise for stock sold after production stops. The reviewer should be able to explain how the model counts each economic event once, even if it appears in several connected schedules.

Check the timing of settlement. Receivables may collect over several months, inventory may need markdowns, and suppliers may be due before either receipt. A positive total recovery does not establish that closure funds itself on every intervening date.

The forecast depends on people completing collections, returns and disposal tasks. Keep enough operating support to resolve customer disputes and produce the records buyers or suppliers require. Include the incremental cost of that work where it changes the cash outcome.

Ask the CFO to retain a base recovery schedule and a slower or lower recovery case for material uncertainties. Identify what evidence supports an assumed supplier return, customer settlement or inventory sale. A commercial discussion without an agreed outcome should remain distinguishable from a confirmed payment.

Update the remaining recovery using actual receipts and settlements while preserving the original estimate. Close the planning item only when the balances are resolved or explicitly assigned to continuing operations. A project's last sales date can arrive well before the company receives its final cash.