The money tied up in operating.
WHAT WORKING CAPITAL IS
Money tied up in stock and in amounts customers owe, less what you owe suppliers.
WHY IT MATTERS
Growth consumes it, and running out of it stops the business.
WHAT INCREASES IT
Holding more stock Customers taking longer to pay Paying suppliers faster
WHAT REDUCES IT
Less stock Faster collection Longer supplier terms Deposits and advance payment
WHAT TO MEASURE
How long stock sits before selling How long customers take to pay How long you take to pay suppliers
WHAT THE CYCLE IS
The days between paying for something and being paid for it.
WHY THAT NUMBER MATTERS
It is how much cash growth will consume.
WHAT A LONG CYCLE MEANS
Every additional sale requires cash before it produces any.
WHAT TO DO ABOUT COLLECTION
Invoice immediately State terms clearly Chase promptly and consistently Take deposits
WHY INVOICING SPEED MATTERS
Delayed invoicing is self-inflicted and extremely common.
WHAT TO DO ABOUT STOCK
Hold less, order more often, and identify what does not move.
WHAT DEAD STOCK IS
Money sitting still, and it is rarely counted as a cost.
WHAT TO DO ABOUT IT
Clear it, even at a loss.
WHY
The cash is worth more than the stock.
WHAT TO NEGOTIATE WITH SUPPLIERS
Terms, once you have a payment record.
WHAT TO AVOID
Funding growth entirely from stretched supplier terms.
