How Much Working Capital Is Stuck on Your Factory Floor? A Walk-and-Count Method (₹)
How much working capital is stuck on my floor? Add three piles: WIP, stock older than 90 days, and finished goods packed but not invoiced. In the assumed ₹60 crore-a-year plant below, they hold ₹2.94 crore. At an assumed 10.5% cash-credit rate (Bank of India's repo-linked rate: 8.35% from 7 October 2026), that costs ₹2.57 lakh a month.
By the Mama Editorial Team. Last checked: 17 Oct 2026, against the RBI MPC resolution of 7 October 2026, the RBI lending-rate release of 30 September 2026, Bank of India's exchange filing of 7 October 2026, the Memorandum to the Finance Bill 2023 and the DC-MSME note on delayed payments. Every ₹ figure in the worked example is a labelled assumption.
Key takeaways
- Three buckets cover most of the cash on a floor: WIP between operations, stock that has not moved in 90 days, and finished goods that are packed but not invoiced.
- Value each bucket at cost, not at selling price. The question is how much of your own money, or the bank's, is already spent and not yet back.
- Price it at your real borrowing rate. The RBI raised the repo rate to 5.50% on 7 October 2026.
- Supplier credit can no longer quietly fund the pile. Since Finance Act 2023, money owed to micro and small suppliers beyond the MSMED Act limit (45 days at most) is deductible only when actually paid.
- The interest is the small number. The one-time cash release is the big one. In the example, bringing the three buckets to target frees about ₹1.72 crore.
- A walk or a camera shows piles and how long they sit. Book value, batch and ageing come from Tally or the ERP. You need both.
Why the floor is the part of working capital you control alone
Working capital has three parts: what customers owe you, what you owe suppliers, and what sits inside the gate. The first two depend on other people. The third is yours: nobody outside the plant decides how many trolleys wait in front of the grinder or why forty cartons have stood in the dispatch bay since Tuesday.
Customers paying late is a national problem. As of 14 August 2026, micro and small enterprises had filed 2,56,892 delayed-payment applications worth ₹55,244 crore on the MSME Samadhaan portal, with ₹20,979 crore still pending, per a CRISIL Intelligence release of 17 August 2026. The floor is cash an owner can release without anyone else's permission.
The three buckets
Bucket 1: Work-in-progress. Material issued to the floor that is not yet a finished unit. It waits between operations, at a job worker, in front of inspection. It is valued at material plus the conversion cost absorbed so far.
Bucket 2: Slow-moving stock. Raw material, bought-out components, consumables and printed packing material that have not moved in more than 90 days. This includes the "keep it, we may need it" pile: steel from a cancelled order, labels for an old artwork, rejected parts awaiting a decision.
Bucket 3: Finished goods not yet invoiced. Packed product that has not been billed. It waits for QC release, a customer schedule, a truck, a short-quantity top-up, or paperwork. Every input cost is spent, and the receivable clock has not even started.
Bucket 3 is the most expensive per unit. Bucket 2 carries the highest risk of never coming back at book value.
The walk-and-count method
You need about two hours, the production head, the store-keeper and a costing sheet. Pick a normal mid-shift hour, not month-end.
- Walk the route the material takes. Stores, each operation, job-work dispatch, inspection, packing, dispatch bay. Then the "invisible" places: mezzanines, the yard, the rejection cage.
- Count WIP queue by queue. At each waiting point, count containers × usual quantity. Note the stage: a part waiting for final inspection carries more cost than one waiting for the second operation.
- Tag what you count. Put a dated sticker on each container in the slow and FG areas. Walk again a week later. Whatever still carries the old mark has not moved.
- Print the stock ageing report. Take the Tally or ERP totals for 91–180 days and over 180 days at book value.
- Count the dispatch bay with a reason for each pile. QC, customer schedule, transport, short quantity, documents. The reason tells you who fixes it.
- Value at cost and add up. Material plus conversion for WIP, book value for aged stock, full factory cost for finished goods.
Worked example: an assumed ₹60 crore-a-year plant
Assumptions (illustrative, not benchmarks). Sales ₹60 crore a year. Factory cost of goods is 80% of sales, or ₹48 crore. The plant runs 300 days a year, so one day of factory cost is ₹16 lakh. A unit in WIP carries, on average, 75% of its full cost. Raw-material and component stock is ₹3.6 crore at book value, of which ₹90 lakh is older than 90 days. Finished goods packed but not invoiced average six days of output.
The "target" column is also an assumption: what this plant's order pattern would need with short queues.
| Bucket | How it is valued | On the floor now (₹ lakh) | Assumed target (₹ lakh) | Excess (₹ lakh) |
|---|---|---|---|---|
| WIP | 9 days × ₹16 lakh × 75% | 108 | 60 (5 days) | 48 |
| Stock over 90 days | From the ageing report: ₹60 lakh at 91–180 days + ₹30 lakh over 180 days | 90 | 30 | 60 |
| Finished goods not invoiced | 6 days × ₹16 lakh | 96 | 32 (2 days) | 64 |
| Total | 294 | 122 | 172 |
Now price it. On 7 October 2026, Bank of India moved its repo-based lending rate from 8.10% to 8.35% after the repo hike, keeping its 2.85% mark-up (Bank of India filing to NSE/BSE, 7 Oct 2026). A cash-credit limit is priced at a benchmark like this plus a credit spread. Assume an all-in rate of 10.5% a year for this plant.
| Bucket | Interest on what is there now (₹ per month) | Interest on the excess only (₹ per month) |
|---|---|---|
| WIP | 94,500 | 42,000 |
| Stock over 90 days | 78,750 | 52,500 |
| Finished goods not invoiced | 84,000 | 56,000 |
| Total | 2,57,250 | 1,50,500 |
Three things stand out.
The excess is a one-time release of ₹1.72 crore. Bring the buckets to target and hold them there, and that cash comes back once.
The interest on the excess is about ₹18 lakh a year. On aged stock, the larger loss is the share that will never sell at book value. The stock ageing calculator puts a write-off figure on that bucket.
Finished goods are the biggest bucket per day. A two-day cut in the dispatch bay frees ₹32 lakh in this example.
To run your own WIP figure from output and lead time, use the WIP cash calculator. Little's law sits behind it: average WIP equals daily throughput times days on the floor.
The rate you are paying for it, as of October 2026
The interest line moves with the policy rate.
- On 7 October 2026 the RBI Monetary Policy Committee raised the repo rate by 25 basis points to 5.50%, and set the Bank Rate at 5.75% (RBI MPC resolution, 7 Oct 2026).
- In August 2026 the weighted average lending rate of scheduled commercial banks was 8.96% on outstanding rupee loans and 8.61% on fresh ones (RBI release, 30 Sep 2026).
- At end-June 2026, 68.2% of outstanding floating-rate rupee loans were linked to an external benchmark such as the repo rate, per the same RBI release. For those loans, a repo change passes through at the next reset.
Your own cash-credit rate is in your sanction letter. Use that, not the example's 10.5%.
Why supplier credit no longer quietly funds the pile
Paying a small vendor in 90 or 120 days used to make a slow floor look free. Two rules end that.
The tax rule. The Finance Act 2023 inserted clause (h) into section 43B of the Income-tax Act, 1961. A sum payable to a micro or small enterprise beyond the time limit in section 15 of the MSMED Act, 2006 is allowed as a deduction only on actual payment. The usual grace of paying by the return due date does not apply. It took effect from 1 April 2024, for assessment year 2024-25 onwards (Memorandum explaining the Finance Bill 2023, Ministry of Finance).
The time limit behind it. Section 15 of the MSMED Act requires payment within the period agreed in writing, which cannot exceed 45 days, or within 15 days if there is no written agreement, per the same Memorandum.
The new Act keeps it. The Income-tax Act, 2025 came into force on 1 April 2026 (CBDT notice, Income Tax Department). It carries the same rule in section 37(2)(g), the Finance Ministry told the Rajya Sabha on 21 July 2026 (reply to Unstarred Question 242, as reproduced by TaxGuru).
The interest behind it. Under section 16 of the MSMED Act, a buyer who pays late owes compound interest with monthly rests at three times the RBI Bank Rate (DC-MSME, delayed payments under the MSMED Act). With the Bank Rate at 5.75% from 7 October 2026, three times is 17.25% a year, compounded monthly. That is far above an assumed 10.5% cash-credit rate.
So stretching a small supplier to fund floor stock is now the dearest money in the plant, and every extra day of WIP or packed stock has to be carried on your own limit. The rule covers micro and small suppliers, not medium ones, so your purchase team needs each vendor's Udyam category on file. Confirm how it applies to your accounts with your CA.
What cameras can and cannot tell you here
A walk is a snapshot; cameras over the same piles can repeat it daily.
What cameras can show: - Where piles are and how big they get. Trolleys in front of a machine, pallets in the dispatch bay, overflow in the aisle. - How long a pile sits. A pallet that has not moved in a marked zone for ten days is a strong signal, whatever the register says. - Dispatch bay rhythm. How long packed goods wait before trucks load.
What cameras cannot show: - Book value. A camera sees a trolley, not the ₹ inside it. Cost comes from your costing sheet. - Part number, batch or age band. Shrink-wrapped pallets and closed bins look alike from the ceiling. Identity comes from Tally, the ERP or a label scan. - Why a pile is waiting. QC hold, customer hold and "no truck" look the same on video. The reason needs a person or a system status. - Stock in closed racks or at a job worker's premises.
The useful pairing is dwell from the camera, value from the books. Compare the ERP's list of stock over 90 days with the zones where nothing has moved. Where they agree, act this week. Where they disagree, the stock is not where the books say, or it moved without an entry.
By industry: where the cash usually sits
For a machine shop, most of it waits between operations and at the heat treater: see WIP between operations in a CNC shop. For a food plant, finished goods carry both cash and a shelf-life clock: see finished goods that don't move in a food godown.
Where Mama fits
Mama reads the video from a factory's existing cameras, or from cameras added where coverage is missing. Each morning it sends the owner a short, plain-language note on where hours and money leaked the day before. Here that means which zones held piles longest and how long packed goods waited in the dispatch bay. It reports machines, zones and flow, not individual people, and the ₹ value still comes from your own books. To see which of your three buckets your current cameras already cover, leave an email or phone in the form below, and Mama will get back to you with a camera plan.
FAQ
How do I calculate how much working capital is stuck on my factory floor? Add three buckets at cost: WIP (daily output × days on the floor × average cost built in), stock older than 90 days from the ageing report, and finished goods packed but not invoiced. Then multiply by your cash-credit rate for the monthly cost.
Should I value floor stock at cost or at selling price? At cost: you want the money already spent and not yet back. Selling price adds margin you have not earned.
What interest rate should I use? The all-in rate on your own cash-credit limit, from your sanction letter. As of 7 October 2026, Bank of India's repo-based lending rate is 8.35% before any credit spread.
Does section 43B(h) apply if my supplier is a medium enterprise? No. Per the Finance Bill 2023 Memorandum, clause (h) covers sums payable to micro or small enterprises. Keep each supplier's Udyam category on file and check the treatment with your CA.
Can cameras tell me the rupee value of the stock? No. Cameras show where piles are, how big they get and how long they sit. Book value, batch and age come from Tally, the ERP or a label scan.