What is Working Capital?
- Working Capital
- Working Capital is Current Assets minus Current Liabilities — the liquidity available for day-to-day operations. Positive working capital means more short-term assets than obligations.
Working Capital Components
Current Assets: cash, trade receivables (debtors), inventory, prepaid expenses, short-term investments. Current Liabilities: trade payables (creditors), short-term loans, accrued expenses, advance from customers. A healthy working capital ratio (current ratio) for manufacturing is 1.5–2.0.
Managing Working Capital with ERP
ERPNext helps optimise working capital by: reducing debtor days (dunning, credit limit enforcement), reducing inventory days (reorder levels, FEFO), and increasing creditor days (negotiating longer payment terms via Payment Terms setup). Real-time AR and AP aging reports allow proactive management.
Infonoxe Technologies specialises in ERPNext implementation and custom software for Indian businesses.
Related Terms
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