Enter your assumptions
The example values are illustrative. Use one currency throughout. Calculations run in your browser; inputs are not sent to us.
Exclude immediate cash sales; use a consistent tax basis.
The cost basis used to estimate inventory.
Purchases financed by suppliers; these may differ from cost of sales.
Average days from credit sale to cash collection; 0–730.
Average stockholding measured against cost of sales; 0–730.
Average payment period for credit purchases; 0–730.
Target collection period at the same annual sales; 0–730.
Target stockholding at the same annual cost of sales; 0–730.
Use payment terms agreed with suppliers; 0–730.
Results from your assumptions
- Estimated trade receivables
- Estimated inventory
- Estimated trade payables
- Current operating working capital
- Current cash operating cycle
- Target operating working capital
- Estimated cash released by the change
Growth can absorb cash before it produces a funding surplus. This calculator estimates the cash tied up in trade receivables and inventory, less trade payables, using annual activity and average days. It then shows the effect of a target operating cycle at the same activity level. This is an operating working-capital model rather than a complete balance-sheet or liquidity forecast; cash, debt, tax and other balances are excluded.
- Model
- Illustrative scenario; replace the example inputs
- Currency
- Use the same currency for every monetary input
- Data handling
- Local browser calculation; no upload or storage
How balances are estimated
Trade receivables equal annual credit sales divided by 365 and multiplied by receivable days. Inventory equals annual cost of sales divided by 365 and multiplied by inventory days. Trade payables equal annual credit purchases divided by 365 and multiplied by payable days. Credit purchases have a separate input because they do not necessarily equal cost of sales.
Operating working capital equals receivables plus inventory minus payables. The cash operating cycle in days equals receivable days plus inventory days minus payable days. The target balance uses the target day assumptions at the same annual activity. Estimated cash released is the current balance less the target balance.
Connect the target to operating changes
Shorter receivable days require a credible collection process, invoicing accuracy and customer terms. Lower inventory days may require shorter replenishment times, more reliable supply or a different production schedule. Increasing payable days requires an agreement with suppliers and may change prices or access to supply.
The calculator measures the arithmetic effect of a target; it does not assume that the target is feasible or costless. A business should examine the service, resilience and relationship consequences alongside the cash result. A lower stock balance may free cash while increasing the cost of a production interruption.
Use the result as a scenario
Positive cash release represents a lower estimated requirement at unchanged activity. A negative value means that the target absorbs additional cash. Negative operating working capital is possible when supplier financing exceeds the estimated inventory and receivables balances; it is not automatically a model error or a guarantee of comfortable liquidity.
The calculation assumes stable average annual activity and ignores seasonality, bad debts, write-downs, customer deposits, tax, cash balances and financing. A growing or seasonal business needs a monthly cash forecast as well. Use consistent measurement periods and reconcile the starting balances with management accounts before relying on the scenario.
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