Startup Funding Espresso -- Financial Projections: Working Capital

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Working capital is the capital you need to run the daily operations of the business and includes anything that can be converted to cash.  

This includes cash, accounts receivables, and inventory.  

Accounts payable reduces your working capital as you must pay it out each month.

Payment terms and timing of cash inflows and outflows impact your working capital.

There’s typically a delay between the time you build and deliver a product/service and when payment of funds arrive.

As we discussed before, cash is king, and running out of cash can shut down a business. It’s important to know your working capital position at all times.

Working capital is calculated as the number of days your sales and payables are outstanding.  

To calculate your current working capital, take your annual revenue and divide by your payment terms.

Place this on the balance sheet. 

Also include the number of days you hold inventory before using it. 

If your working capital is insufficient, there are numerous financing options to fill the gap.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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