The money available to run your business day-to-day — what you own minus what you owe in the short term.
Working capital is your business's day-to-day financial cushion. Think of it as the money in your operational wallet after paying immediate obligations. Positive means you can cover bills, pay staff, and keep moving. Negative means trouble — even if your P&L looks fine.
Working Capital = Current Assets − Current LiabilitiesMany profitable businesses go bust because of working capital problems. If your customers pay you late but you must pay suppliers early, your working capital is being squeezed. A business can show £100,000 profit on paper while being unable to pay next month's rent.
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A manufacturer is profitable but keeps running out of cash. AskBiz calculates their working capital ratio is 0.8 — below the safe threshold of 1.5. The cause: customers paying on 75-day terms while they pay suppliers on 30 days. AskBiz recommends an invoice financing solution.
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Yes, and it's surprisingly common. Profit is an accounting concept. Working capital is about timing of cash flows. A business collecting revenue slowly while paying costs quickly will have working capital problems even while showing profit.
Four main levers: collect receivables faster, delay payables (negotiate longer terms with suppliers), reduce inventory levels, or inject cash (loan or equity). AskBiz can analyse which lever will have the biggest impact for your specific situation.