Published by: S&B Advisors and Consultants (Private) Limited
Author: Dr. Batool Darukhanawalla
Date: August 27, 2025
When we talk about business performance, the spotlight usually goes to profits, revenue growth, or market share. But behind the scenes, there’s one figure that quietly determines whether a company can truly survive day to day: working capital.
Think of it as the oxygen of your business. Without enough of it, even profitable companies can find themselves gasping for breath.
So, What Exactly Is Working Capital?
It’s the difference between what your business owns in the short term (current assets) and what it owes in the short term (current liabilities).
👉 Formula: Working Capital = Current Assets – Current Liabilities
- Positive working capital = You’ve got a comfortable cushion.
- Negative working capital = A warning sign (though in some fast-moving industries, like retail, it’s strategic).
Why Does It Matter?
Because profits don’t pay the bills — cash does. Working capital is what keeps the wheels turning.
- Liquidity = Peace of Mind → Cover payroll, pay suppliers, keep the lights on.
- Fuel for Growth → Grab supplier discounts, launch new products, or scale faster.
- Buffer Against Shocks → Handle slowdowns, delayed client payments, or sudden repairs.
- Efficiency Signal → How you manage receivables, payables, and inventory reflects your discipline.
Finding the Sweet Spot
Too little working capital? Missed payments and lost credibility.
Too much? Idle cash that could be invested elsewhere. The key is balance.
Quick Wins to Boost Working Capital
- Get paid faster — invoice promptly, offer early payment discounts.
- Pay smart — use credit terms wisely without straining supplier trust.
- Trim the fat — cut slow-moving inventory and unnecessary spending.
- Check the pulse — monitor monthly, not just at year-end.
Bottom Line:
Working capital isn’t just an accounting metric. It’s your business’s financial heartbeat — the stamina that keeps you running strong.
💡 A profitable business without working capital is like a runner with no endurance: it might start fast but won’t last long.
#WorkingCapital #CashFlow #BusinessGrowth #SMBsuccess #FinancialHealth #LiquidityMatters #BusinessFinance
For further insights into working capital management connect with our team at S&B Advisors and Consultants (Pvt.) Ltd.
📞 +92 300 0632823 | 📍 Office No. 1, Ground Floor, Marium Arcade, BC5, Block 9, Clifton, Karachi-75600 |🌐 www.sbconsultantsltd.com