Working capital

Working Capital can simply be defined as the cash you have put to work in your business. What is the cash “working on”? Good question. Typically there are three areas:

  1. Granting your customers short-term loans (aka Accounts Receivable)
  2. Paying for all that stuff in your warehouse (Inventory)
  3.  Short-term loans your vendors have given you (Accounts Payable)

Optimizing your working capital doesn’t have to be complicated. How well you have it optimized is always a function of how well you understand how cash moves through your business in the first place.


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