Working capital is the difference between a company’s current assets and its current liabilities. Working capital management is the process of managing a company’s current assets and liabilities in a way that maintains a positive working capital and ensures the ongoing solvency of the business. Effective working capital management is critical to the success of any business, regardless of its size or industry, as it maintains liquidity, reduces financial risk, improves efficiency and enhances profitability.

The key tips for effective working capital management include regularly monitoring working capital, managing inventory, collecting outstanding receivables, managing payables and planning for growth. Business owners should understand what working capital is, how to calculate it and how to manage it effectively to ensure ongoing success.