Drawing power sits at the centre of working capital lending. It determines how much a borrower can draw against current assets, and it is recalculated every time a stock statement comes in. In many banks that calculation still happens in spreadsheets maintained by individual branches or analysts.
Each spreadsheet looks reasonable on its own. The risk lies in the variation between them, and in the small errors that repeat month after month.
Where the errors come from
The first source is inconsistent rules. Margins, ageing cut-offs for receivables and the treatment of ineligible stock should follow the sanction terms. When each analyst maintains their own template, those terms drift. A receivables cut-off of 90 days becomes 120 in one file; creditors are deducted in one place and forgotten in another.
The second is stale data. If a stock statement is late, the previous month's drawing power often simply rolls forward. Nobody decides to accept the risk; it just happens.
The third is the absence of comparison. A manual process computes the figure but rarely asks whether it makes sense. A sudden jump in inventory or a sharp fall in creditors can signal stress or window-dressing, but only if someone looks.
Why it matters
Overstated drawing power means the bank is lending against security that isn't there. Understated drawing power frustrates good borrowers. Either way, when auditors or inspectors ask how a figure was derived, reconstructing it can take days.
What good looks like
A sound process applies one set of rules, configured from the sanction terms, to every account. It tracks pending statements and escalates them. It compares each computation with previous periods and with the outstanding balance, and it records every step. Human judgement is then spent where it matters: on the exceptions.
That's the principle behind our Drawing Power Automation service. You can also try our Drawing Power Calculator to check an individual account.