Lean Working Capital Measures

Working capital is a critical measure of a company’s financial health, as it represents the funds available to cover day-to-day operating expenses. It’s calculated by subtracting current liabilities, such as accounts payable and short-term debt, from current assets, such as cash, accounts receivable, and inventory. A healthy working capital position allows a company to speed up its cash-cycle, meet its short-term obligations, manage inventory, reduce financial risks and invest in growth opportunities.

Lean Working Capital can improve cash flow by accelerating collections from customers, renegotiating payment terms to suppliers, and minimizing inventory levels. By collecting payments faster and paying bills later, a company can free up cash to support operations and growth. Additionally, minimizing inventory levels can reduce the amount of capital tied up in stock, reduce storage and handling costs and reduce risks of obsolesces. Overall, by taking some lean management steps with regards to working capital, a business can improve its financial position, which will support financial stability, sustainability and future growth.