What is working capital and how do you manage it optimally?

Working capital is a demanding concept for enterprises. And that´s its right. Because, when you lose sight of your working capital, it can lead to financial distress. What is working capital? How do you manage it optimally? We provide a clear introduction!

What is working capital?

Working capital is the difference between assets (supplies, accounts receivable, debtors, …) and liabilities (accounts payable, short-term loans, …) within your business. This term represents the liabilities available to cover your daily, professional activities. Think about paying suppliers, investing in the production process, and paying your employees.

Managing your working capital

Working capital is of great importance within businesses. It ensures that the company is able to cover operational costs, function optimally, and realize growth. Are there too few liabilities? In the long run, this could lead to the sale of assets, restructuring, or even bankruptcy. More reasons to pay attention to your working capital! You manage your working capital within five differnet domains: