Working capital calculator

From your accounts: debtor days ≈ trade debtors ÷ turnover × 365; stock days ≈ stock ÷ cost of sales × 365; creditor days ≈ trade creditors ÷ cost of sales × 365. Your accountant can confirm them.

Invoice promptly, agree shorter payment terms or deposits, hold less slow-moving stock, and negotiate longer supplier terms. Finance can cover what’s left.

Invoice finance, stock finance, trade finance, a revolving credit facility or a short-term working capital loan, depending on where the cash is tied up.

Divide trade debtors by annual turnover and multiply by 365. For example, £300,000 owed by customers on £2m of turnover is about 55 days. If turnover is seasonal, a year-end figure can mislead, so try an average across the year. Your aged debtor report shows which customers are holding the number up.

Enough to fund the gap between paying for costs and being paid by customers, plus a buffer for slow months and unexpected bills. This calculator estimates the core figure from your turnover, cost of sales and payment days. The right buffer depends on how seasonal and predictable your trading is, which your accountant can help you judge.

It means you are paid by customers before you have to pay suppliers, so suppliers are effectively funding your trading. It is more common in businesses that take payment up front and hold little stock. The calculator shows a negative cycle as a negative number of days, and shows no cash tied up when creditors outweigh debtors and stock.

Working capital is a snapshot: current assets, such as cash, stock and money owed by customers, less current liabilities, such as supplier bills. Cash flow is the movement of money in and out over time. A company can have positive working capital on paper and still run short of cash if it is tied up in stock or slow-paying customers.