Working capital and the working capital cycle

Formula

Working capital = Current assets − Current liabilities

Working capital (cash conversion) cycle

Inventory days + Debtor days − Creditor days = Cash cycle (days)
e.g. 45 + 60 − 40 = 65 days

The business must fund 65 days of operations from its own money or bank limits.

Ways to improve it

• Collect faster: shorter credit terms, reminders, early-payment discounts, e-invoicing to speed disputes.
• Hold less stock: reorder levels, clear slow-moving items.
• Pay suppliers on agreed terms (but within the MSME 45-day limit).
• Match bank cash-credit limits to the real cycle.

Where to look in Hisab Central

Ledgers (Net Working Capital), Inventory Items (restock and slow items), Cash & Bank Book, and outstanding reports.