Strong sales are important, but they don’t guarantee a healthy business. What does? Positive working capital. If you’ve ever felt like your business is making money but still struggling to pay the bills, it’s likely time to take a closer look at how your working capital is managed.

At Behney Management Strategies, we work with business owners to break down their numbers in a way that leads to smarter decisions—not just flashier reports. Working capital is one of the most telling indicators of whether your business has enough liquidity to operate efficiently and grow with confidence.

Let’s walk through how to evaluate your current position and outline steps you can take to strengthen it.

What Is Working Capital, Really?

Working capital is the difference between your current assets and current liabilities. In short:

Working Capital = Current Assets – Current Liabilities

Current assets include cash, accounts receivable, and inventory. Current liabilities include accounts payable, short-term debt, and accrued expenses.

Positive working capital means you can cover your short-term obligations without scrambling. Negative working capital, on the other hand, can indicate trouble—even if your profit and loss statement looks strong.

Why Working Capital Matters

Healthy working capital ensures:

• You can cover payroll, vendor payments, and day-to-day operations without borrowing
• You have the flexibility to take on new projects or inventory when opportunities arise
• You reduce your dependency on credit lines or emergency funding
• You can survive short-term downturns in sales or unexpected expenses

In other words, it’s the fuel that keeps your business engine running—especially in seasonal industries or during periods of rapid growth.

Step 1: Evaluate Your Current Working Capital Position

Start by reviewing your latest balance sheet. If your current liabilities are close to or exceed your current assets, your business may be operating on thin margins—or relying on debt to float operations.

From there, analyze these key metrics:

• Current Ratio (Current Assets ÷ Current Liabilities): A ratio of 1.5 to 2.0 is generally healthy.
• Days Sales Outstanding (DSO): How quickly you collect receivables.
• Days Inventory Outstanding (DIO): How long inventory sits before being sold.
• Days Payable Outstanding (DPO): How quickly you pay your vendors.

Each of these affects how cash flows through your business on a daily basis.

Step 2: Improve the Levers You Can Control

1. Speed Up Receivables

• Send invoices immediately after delivery of goods or services
• Offer discounts for early payment
• Use automated follow-ups for overdue accounts
• Consider customer credit policies—are you extending too much credit for too long?

2. Manage Inventory More Efficiently

• Implement inventory forecasting based on sales data
• Eliminate slow-moving or obsolete products
• Use just-in-time (JIT) principles if applicable
• Regularly reconcile physical inventory with records

3. Extend Payables—But Smartly

• Negotiate longer payment terms with vendors when possible
• Take advantage of early payment discounts only if your cash flow allows it
• Avoid delaying payments that hurt supplier relationships or credit standing

4. Build a Cash Flow Forecast

A rolling 13-week cash flow forecast can help you spot shortfalls before they become emergencies. Forecasting forces you to plan—not react—and ensures you’re not caught off guard by seasonal swings or delayed receivables.

5. Revisit Your Pricing and Margins

Sometimes, working capital issues aren’t about timing—they’re about margins. If your gross margins are thin, even strong sales might not be enough to fund operations. Consider if price adjustments or cost reductions are warranted.

Final Thoughts

Working capital isn’t just an accounting metric—it’s a real-world indicator of whether your business is financially healthy, resilient, and ready to grow. It deserves more than a passing glance during tax season.

At Behney Management Strategies, we help business owners evaluate working capital as part of a larger financial strategy. We don’t just crunch numbers—we build systems that improve liquidity, reduce risk, and support sustainable growth.

If your business feels profitable but cash is always tight, let’s take a deeper look.

Behney Management Strategies – Small Business, Big Goals.

WRITTEN BY

David Behney, Founder & CEO

David Behney is the Founder and CEO of Behney Management Strategies, where he helps small businesses achieve their big goals through expert C-suite consulting. With a background in fractional CFO services, David now provides strategic guidance across finance, operations, marketing, and technology to businesses with $1M–$30M in revenue. Passionate about driving growth and sustainability, he partners with business leaders to build strong foundations and navigate challenges. Connect with David to take your business to the next level.