How to Manage Working Capital

Working capital is the money allotted for day to operations and any debt that your company possesses. This article will show you how manage your money in order to avoid financial disaster. Following the steps below will help you monitor your day to day progress, and show you what you can and cannot afford.

Difficulty: Moderately Easy

Instructions

1. List all of your current debt and recurring expenses such as mortgage, utilities and any day to day needs. If you run a business you must include payroll cost and all associated benefits such as advertising and marketing costs if applicable. Write the average cost for each category or item. Be sure to document annual expenses such as land taxes. Everything that is a pay out must be listed in order to determine what your day to day cash flow must be.

2. Total each category together then add the totals from each of them. With the grand totals of your average annual pay out for expenses written down, divide this number by 365 and you will have the numbers that reflects the minimum amount you must earn on a daily basis to stay balanced.

3. Locate your financial reports from the previous year. Use your income tax filing for the most accurate results if you do not know what you earned.

4. Divide the total amount you earned on average by 365 and this number will show your progress or decline.

5. Write down the current amount of liquid cash that you have in a savings or checking account. Secure 50 to 75% of this amount in a high yield savings or CD account if applicable.

Tips & Warnings

• Highlight areas that can be eliminated in order to free more capital.
• Avoid financing if possible.
• Track your progress daily.