Working capital calculator
Profit isn't cash. See how much cash your debtors, stock and suppliers tie up, and what happens to your bank balance when customers pay later, suppliers want paying sooner or sales grow.
Where your cash is tied up
Creditors sit below zero because money you owe suppliers is cash you're holding on to. The last pair is the total cash the business needs to keep running.
| Change | Cash needed | Each extra day |
|---|---|---|
| Customers pay 15 days later | $123,288 | $8,219 |
| Suppliers paid 10 days sooner | $49,315 | $4,932 |
| Stock sits 0 days longer | $0 | $4,932 |
| Sales grow 20% | $73,973 | – |
| All of it together | $281,096 | – |
In short: Working capital is the cash tied up running your business: what customers owe you plus stock, minus what you owe suppliers. With $3 million in sales, a 40% margin, customers paying in 45 days, 30 days of stock and suppliers paid in 30 days, about $370,000 is tied up. If customers stretch to 60 days, suppliers want paying 10 days sooner and sales grow 20%, that jumps to about $651,000, so the business needs an extra $281,000 of cash.
How it works
Why growing businesses run out of cash
You pay for stock and wages before customers pay you. The faster you grow, the more cash sits in that gap. In the example, 20% growth on its own needs about $74,000 more working capital, even with nothing else changing.
The levers you control
Every day customers take to pay costs about a day of sales in cash: roughly $8,200 a day at $3 million. Invoice on time, chase early, make paying easy, agree supplier terms you can live with and keep stock lean. A few days either way adds up fast.
FAQ
Common questions
What is working capital?
It's the cash needed to run day to day: debtors (what customers owe you) plus stock, minus creditors (what you owe suppliers). It's money that's earned or committed but not yet in your bank account.
How do I calculate how much working capital I need?
Debtors are about annual sales ÷ 365 × the days customers take to pay. Stock is cost of sales ÷ 365 × stock days. Creditors are cost of sales ÷ 365 × the days you take to pay suppliers. Add debtors and stock, then subtract creditors.
Why is there no cash when my business is profitable?
Profit is counted when you invoice, but cash arrives when customers pay. If customers pay slowly, you carry a lot of stock or you're growing fast, cash goes out well before it comes back in.
What is the cash conversion cycle?
It's debtor days plus stock days minus creditor days: how long each dollar is tied up between paying suppliers and getting paid. In the example it's 45 + 30 − 30 = 45 days. Shorter is better.
How do I fix a cash flow squeeze?
Tighten invoicing and collections, review payment terms with customers and suppliers, clear slow-moving stock and forecast your cash 13 weeks ahead so you can arrange finance before you need it. We can build that forecast with you.
Tax & Accounting
Read before you decide
General information only. These calculators give estimates based on the figures you enter and published rates, and don't consider your objectives, financial situation or needs. They're not a quote, credit assessment or tax advice. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd, Australian Credit Licence 390261.
