Sound management of working capital is crucial for startups. As a startup owner, you are likely familiar with the term “working capital\u201d. This is an accounting and legal comparison between your current assets and liabilities. This article will explain how your startup can best manage its working capital. <\/p>\n\n\n\n
You can calculate working capital by looking at your startup\u2019s current balance sheet. The formula is:<\/p>\n\n\n\n
Working capital = Current Assets – Current Liabilities<\/p>\n<\/div>\n\n\n\n
The most important current assets for working capital are:<\/p>\n\n\n\n
The two most important current liabilities are your startup\u2019s:<\/p>\n\n\n\n
The nature of your startup\u2019s working capital depends on the sector you operate in. For instance, manufacturing startups<\/a> will have significant inventories of raw materials, works in progress, and finished goods. If you have a manufacturing startup, it will sell its goods on credit, which translates into significant trade receivables. <\/p>\n\n\n\n On the other hand, if your startup is a retailer, your inventories will only consist of unsold stock. You will then sell this stock for cash (rather than on credit). <\/p>\n\n\n\n If your startup is a service provider, such as a SaaS or fintech, you will not have any inventories, though you may sell your services on credit. <\/p>\n\n\n\n In essence, working capital management for startups will depend on the sector the startup operates in and its own circumstances. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n