Why Working Capital is important for your business is episode 52 of I Hate Numbers podcast.
The podcast is part of my mission to help you get closer to your numbers, to appreciate the power of what those numbers can do. Improve your money mindset, help you make more profits, save taxes, and help you have the business you want and deserve.
Firstly, let me tell you what is in his week’s episode.
- What working capital is
- Explain how you calculate it
- Why Working Capital is Important for Your Business
- Tips to improve and manage your working capital.
Why Working Capital is important
No business in the world has ever made more money with poorer management – Bill Terry
Imagine your business as a car. Your car could be a beautiful piece of engineering. However, unless you have fuel to power your car it is a useless vehicle.
Your working capital is the fuel equivalent in your business, it powers your business, and keeps it business going. It is your short-term funds that pays your bills, pay yourself, buy more stuff, service loans. You get the picture.
Listen to find out more.
What is Working Capital?
Firstly, your business will have items of short-term value, current assets. Your current assets will be products you have not yet sold, or projects or services not completed. In addition, you will have unpaid customer accounts. Lastly you will (hopefully) have money in your bank account.
Those items are called inventories, receivables, and cash. In old money, that’s stock, debtors, and cash.
Furthermore, you will have current liabilities, such as unpaid supplier bills (payables) and short-term loans. In old money that’s creditors.
Working Capital & Days Your Money is Tied Up
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Your business should have more current assets than current liabilities. Above all, you need to minimise your money tied up in your current assets, maximise the credit terms given by your suppliers. Be careful that you maintain good relationships with your suppliers and pay your bills on time. Also make sure you can manage and track this with good accounting systems.
If you have topics you want explored in future episodes, then let me know. The show is there to help you improve your money mindset, make money, survive, and thrive and give you the business you want. Get in touch with us to see how we can help you with your accounting and business needs. Subscribe so you do not miss an episode of I Hate Numbers. For more business and finance, news, advice and tips
In this episode
- Appreciating that your business needs sufficient working capital.
- Being aware that your money is tied up in your customers and inventories.
- Understanding that product and service businesses have inventories (stock)
- Tips to improve your working capital.
- Developing your own Numbers confidence and decisions
- Take more control of your numbers to help make you money, survive and thrive.