Working capital management for directors

2 min read

Tied-up cashStock + debtors − creditors

Free it upFaster collection, smart terms

Fund the gapWhen timing won't close

What working capital really is

Working capital is the money circulating through your operating cycle: cash goes out to buy or make stock, sits there until it sells, becomes an unpaid invoice, and finally returns as cash — while your own suppliers wait for payment. The gap between money going out and coming back is what you have to fund. Shrink that gap and you release cash the business already owns.

The three levers

You manage working capital with three levers. Stock: hold less, turn it faster, don't tie cash up in inventory that sits. Debtors: invoice promptly, chase firmly, shorten the time customers take to pay. Creditors: use supplier terms fully without abusing them. Move all three the right way and cash appears — no borrowing required.

Getting paid faster

The biggest lever for most companies is debtor days. Invoice the moment work is done, make terms clear, and chase overdue accounts without embarrassment — a firm, systematic process gets money in weeks sooner. See how to chase late invoices and how to reduce debtor days. For persistent gaps, invoice finance turns unpaid invoices into cash today.

When you need to fund the gap

Sometimes good management isn't enough — a big order, a seasonal build, or growth itself widens the gap faster than you can close it. That's not failure; it's when a facility earns its keep. Short-term funding bridges the timing so you can take the opportunity without starving the business of cash. Credicorp lends to the company with no personal guarantee — size the need with the working capital calculator.

Watch the ratios

Keep an eye on your current ratio and quick ratio as quick health checks, but trust your cash forecast over any single number. See how to forecast cash flow to see the gap coming before it bites.

Frequently asked questions

What is working capital in simple terms?

It's the cash tied up in running the business day to day — money stuck in stock and in invoices customers haven't paid yet, minus what you owe suppliers. The wider that gap, the more cash you need to fund it.

How do I free up working capital?

Turn stock over faster, get customers to pay sooner, and use supplier terms fully. The biggest win for most companies is collecting invoices faster. Done well, these release cash the business already owns, reducing the need to borrow.

When should I borrow for working capital?

When a genuine timing gap — a large order, seasonal build or rapid growth — outpaces what better management can close. A short-term facility bridges the gap so you can take the opportunity without running the business short of cash.