Scottish firms could cash in up to £742m by tightening up working capital

But further improvements could still be made – according to the report, Scottish firms have the potential to reap a further £742m across their balance sheets by improving working capital performance.

Across the UK, the figure is £24.2 billion.

While Scotland has seen a significant jump in percentage terms, the overall working capital ratio remains low. Since 2010, Scottish firms have also experienced the sharpest deterioration in the net working capital (NWC) ratio - a 60 per cent drop that has been mainly driven by the utilities sector.

In contrast, West and Wales have the highest net working capital (NWC) ratio – the most cash tied up in its supply chain and customer transactions while businesses in the North have found it hardest to turn earnings into cash.

Bruce Cartwright, head of business recovery services at PwC in Scotland, said: “This report shows how crucial it is to get cash back on the management agenda. Improvements in customer payment, for example, could help drive more efficient collection processes, including digital invoicing and improved customer payment terms, and that can only be positive for organisations.”

Smaller businesses are taking longer to collect cash after sales when measured in Days Sales Outstanding (DSO), and longer to convert their inventory into sales when measured in Days Inventories on Hand (DIO). They also take far longer to pay their creditors when measured Days Payables Outstanding (DPO).

Across the board, companies with better working capital performance have lower capital investment and debt ratios.