Calculator
Working Capital Calculator
Working capital is the money the business needs to run between the day you spend and the day you get paid. Here is how much you have, and how much you need.
Costs and estimated earnings in excess of billings.
Billings in excess of costs and estimated earnings.
Accrued payroll, taxes, current portion of debt.
Results
- Working capital
- $570,000
- Current ratio
- 1.46
- Cash-conversion cycle
- 30 days
- Required working capital (estimate)
- $739,726
- Shortfall below requirement
- $169,726
Current assets $1,820,000 minus current liabilities $1,250,000
Above 1.2 is generally comfortable. Sureties often want more.
Revenue times cash-conversion cycle, divided by 365.
Illustrative only. Sureties and lenders apply their own definitions and targets; confirm yours with your agent and banker.
Growth eats working capital. Every new job, customer, or location requires cash for labor and materials before the invoice is paid. Companies that grow faster than their working capital can support end up profitable and broke, which is a condition banks recognize and do not enjoy financing.
This calculator computes working capital and current ratio from your balance sheet, then estimates the working capital your revenue and cash-conversion cycle actually require. Sureties and lenders run a version of this on every contractor they underwrite. Better to run it first.
How to read the result
- Working capital equals current assets minus current liabilities.
- Current ratio equals current assets divided by current liabilities. Above 1.2 is generally comfortable; sureties often want more.
- Required working capital is estimated as annual revenue times the cash-conversion cycle divided by 365.
- A negative gap means growth is outrunning your balance sheet. That is a financing conversation, not a sales problem.
FAQ
Questions about this calculator
What counts as a current asset?
Cash, accounts receivable, retainage receivable expected within a year, inventory, costs and estimated earnings in excess of billings (underbillings), and prepaid expenses. Exclude officer loans and anything you cannot collect within twelve months.
How do I estimate my cash-conversion cycle?
Days sales outstanding plus days inventory outstanding minus days payable outstanding. For a contractor with 60-day collections, little inventory, and 35-day payables, the cycle is about 25 days. Retainage stretches it.
What ratio do sureties want?
It varies by surety and program, but underwriters commonly look at working capital as a percentage of backlog and at the current ratio alongside it. Your surety agent can tell you the targets for your program.
Keep reading
From the number to the decision
The service that acts on this result, the articles that explain it, and the industries where it matters most.
Services
- Cash-Flow ConsultingProfit is a calculation. Cash is a balance. We give you the forecast, the collection discipline, and the working-capital plan that keep the balance on your side.
- 13-Week Cash-Flow ForecastThe one instrument that tells you what the bank balance will be in week nine. Built from your actual receipts and payables in two weeks, then updated every Monday until it becomes how the company runs.
Insights
- How Much Working Capital Should a Contractor Have?Your surety, your bank, and your payroll all draw on the same number, and none of them compute it the way your bookkeeper does. Here is how to define it, how to set a target, and which levers move it without a capital contribution.
- What Is a 13-Week Cash-Flow Forecast?One page, 13 columns, updated every Monday. The forecast that tells you which Friday is the problem, and how many weeks you have to fix it.
- How Much Cash Should a Growing Business Maintain?Growth consumes cash before it produces any. Here is how to compute the reserve your company needs, why the profit is in the warehouse and on the aging report, and how to tell a line of credit that is a buffer from one that has become a crutch.
Industries
- ConstructionJob costing the field trusts, a WIP schedule your bonding agent believes, and a cash forecast that sees the payroll before it leaves. Finance leadership for contractors doing $3M to $50M.
- General ContractorsMost of the money on a general contractor's income statement belongs to someone else. Finance leadership that keeps the pass-through moving, protects the fee, and gets the surety what it needs before it asks.
- HVACService and replacement are two businesses sharing a truck. Finance leadership that reports them separately, forecasts the shoulder season, and turns ServiceTitan data into numbers a lender or buyer will believe.
Calculators
- Full-Time vs. Fractional CFO Cost CalculatorSalary is the smallest part of what a CFO costs. Put in the real numbers and compare them with a fractional engagement sized to your company.
- Construction WIP CalculatorEnter contract value, estimated cost, cost to date, and billings to date. Get percent complete, earned revenue, and whether the job is overbilled or underbilled.
- Gross Margin CalculatorMargin and markup are not the same number, and confusing them is the most expensive arithmetic mistake in the trades. This calculator keeps them straight.
Financial assessment
Let us look at what needs attention.
A confidential financial assessment starts with a 30-minute conversation about cash, reporting, and the decisions in front of you. No pitch deck. No obligation.