Working capital. What is it, why you need it, and what is excess working capital? In this episode of Shoot the Moon, Mike and Ryan dive into working capital and what it means for your business during a transaction. Working capital is something that comes up in every M&A deal we have been a part of so it’s important as a buyer or seller to fully understand how it impacts your business.
Working capital is the liquidity that is needed to run the business to pay your obligations. Some people call it cash flow, but essentially the ability to pay your obligations in your business and how quickly you can turn orders to cash is how we define working capital. Accounts receivable management is important to maintain positive liquidity. Cash is king!
Many small businesses don’t have good policies in place to maintain good cash flow management. It’s easy to let your payables bloat when it’s not being managed every day.
In this episode we discuss: