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Finance & Payments

Working Capital

Working capital is the money a business has available for day-to-day operations, calculated as current assets minus current liabilities.

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Working capital measures short-term financial health — whether a business can cover its immediate obligations. In procurement, payment terms directly affect it: paying suppliers later (higher days payable outstanding) frees up cash, while paying earlier ties it up but may earn discounts.

Managing working capital is a balancing act between cash flow, supplier goodwill and the cost of financing. Extending supplier payment terms and consolidating purchasing are common procurement levers to improve it.

Frequently asked questions

What is working capital?
Working capital is the money available for day-to-day operations — current assets minus current liabilities — indicating whether a business can cover its short-term obligations.
How does procurement affect working capital?
Through payment terms: paying suppliers later frees up cash and improves working capital, while paying earlier ties up cash but may capture early-payment discounts.

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Payment terms & working capital calculator

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