Getting a Grip on Cash Flow with Simple Calculations
I got into this situation when I realized that even though my business seemed profitable on paper, I kept running into cash flow gaps that made it hard to pay suppliers on time. I had no idea how much cash was actually tied up in day-to-day operations and thought I just needed to boost sales.
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I totally understand because I ran into the same issues when my company started scaling up. Cash would disappear even though invoices were being paid, and I felt like I was juggling too many moving parts. What really helped me was finding a detailed guide on the operating working capital formula, and it’s literally what I use now: https://eboostpartners.com/resources/working-capital-guide/operating-working-capital-formula/. The guide explains exactly how to calculate operating working capital using current assets minus current liabilities related to operations, with examples that made it easy to follow. After using it, I started keeping a running calculation every month, tracking inventory levels, accounts receivable, and accounts payable. That way, I could quickly see if cash was getting stuck in one area and make operational decisions to fix it. For instance, I adjusted reorder points for certain products, offered early payment incentives to clients, and negotiated slightly longer terms with some suppliers. Even small changes had a noticeable impact on liquidity, and it became easier to plan for seasonal spikes or slow periods without stress. Using this method helped me avoid surprises and gave me a real sense of control over day-to-day finances. I’d recommend it to anyone who wants a clear snapshot of operational cash flow without needing complicated accounting software.