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Working Capital Calculator

With the Britain and the World gripped in Financial Crisis and Credit Crunch it's very important for Small Businesses to keep a close eye the Working Capital required for the short-term running of the business.

With British Banks hitting the news running out of Working Capital and having to be recapitalised it would be prudent to calculate your own business needs and forcast your Working Capital requirements. This should be done on a regular basis during the current downturn in the economy.

Working Capital

Working Capital is your current assets (typically stock, cash at the bank and debtors) less your current liabilities (trade creditors, PAYE & VAT and your bank overdraft. All this information should be on your balance sheet.

The amount of working capital required may vary during the year or even month to month. Use this calculator to estimate your maximum Working Capital requirements. This isn't a comprehensive formula for calculating Working Capital but should provide a rough guide to the amounts required.

The average time Raw materials are in stock
Average time to produce goods or service
Average time finished goods in stock
Credit Terms from suppliers
Average credit terms offered to customers
Estimated sales next month  
Net Profit Margin (optional) %  

If your business in growing you should use budgeted sales figures and it's recomended to calculate your Working Capital requirements on a regular basis.

Ideas to manage Working Capital include improving terms with suppliers, giving less credit to customers, factoring invoices or getting an overdraft with your bank. However during times of recession you should keep as much of your debt as fixed-term loans and keep your overdraft requirement to a minimum. In times of expansion when finance is more available and there isn't a credit crunch it may be more cost-effective to make use of an overdraft.

If you are interested in more information about small business funding or grants then visit the dedicated area on our website where you will find articles and links to various bodies offering grants or further information.

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