The objective of this paper is to establish a theoretical foundation for financial supply chain management (FSCM) in order to strengthen managerial decisions concerning financial flows in supply chains. Although such decisions are made frequently and partial aspects of FSCM are already understood in business practice, empirical knowledge about FSCM is in its early stages. The study provides fundamental information derived from eight case studies based on 40 interviews. The analysis extends previous studies of the interface between operations management and finance by (i) contributing to a mid-range theory of FSCM by exploring two distinct but not exclusive FSCM categories, their antecedents, and performance effects, (ii) empirically deriving a testable framework for FSCM, (iii) relating FSCM to established theories in the field of SCM, and (iv) basing the analysis on transaction cost economics. Managerial insights reveal that weak working capital causes firms to focus on FSCM. More specifically, the study identifies two FSCM categories: pre-shipment FSCM (before invoice release) and post-shipment FSCM (after invoice release). Managers can improve upstream supply chain working capital with pre-shipment FSCM, whereas post-shipment FSCM strengthens the buying firm’s working capital position. Based on transaction cost economics, we analyze how these improvements stem from risk reductions, which are more effective if firms are integrated internally and externally.