How to maximise your working capital.

How does working capital affect my business?

Strong working capital management is the backbone of a thriving business:

Good working capital means you can pay your bills promptly (suppliers love this), handle unexpected expenses, and seize opportunities without taking on unnecessary debt
Poor working capital can limit your ability to operate and grow.

Take advantage of Westpac’s flexible solutions to help you keep cash flowing, handle seasonal ups and downs, and invest in future growth — so you can plan for success.

What is working capital?

Working capital is the money or current assets (like your accounts receivable or stock) that your business has on hand for its day-to-day operations - like paying bills, keeping things running, and seizing opportunities.

Managing your working capital well keeps your business stable and puts you in a strong position to grow.

How is working capital measured?

Working capital = Current assets – current liabilities

If you have more liquid assets than liabilities (debts), you’re in a positive position.
If it’s the other way around, you may need to make changes to improve your liquidity. (If something is ‘liquid’, it means you can convert it quickly into cash.)

What’s the difference between working capital and cashflow?

Working capital is a snapshot of your current financial position.
Cashflow tracks money in and out of your business over time.

You can have strong cashflow but weak working capital (and vice versa). For a healthy business, both should be strong.

7 steps to improve your working capital.

1

Manage inventory and stock

Balance your stock levels - don’t tie up too much cash but avoid running out. Use sales data and forecasts to order smarter.

2

Control expenses

Trim non-essential costs and improve efficiency, without cutting growth-related spending like marketing or customer service.

3

Monitor cashflow

Track money in and out regularly. Anticipate shortages or surpluses and maintain a “rainy day” fund for leaner periods.

Learn more about cashflow

4

Invoicing promptly

Sending out invoices to customers promptly and adjusting payment terms (for example 7-day invoices vs 20th of the following month) can reduce your “waiting” period and debtor’s ledger.

5

Negotiate better payment terms

Flexible options can ease tight cashflow but always pay when you can.

6

Offer early payment discounts

Encourage customers to pay promptly with incentives or rewards.

7

Reduce overheads

Streamline outgoings while being careful not to undermine revenue; for example, moving premises to pay less rent only works if it doesn’t hurt sales.

Working capital solutions.

Talk to us today.

Let’s work together to manage your working capital. Speak with one of our business specialists.

Call 0800 288 101

Get in touch

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FAQs.

Can you get a loan for working capital?

Yes - you can apply for funding to cover short-term business needs including wages, bills, and stock. A business specialist can help you find the right working capital solution for your business.

Why is working capital so important?

Working capital is the backbone of a healthy business. In short it is the money available to meet your current, short-term obligations and is an indication of a business’s health. Having enough working capital can make all the difference in building a business that's thriving and ready to seek new opportunities.

What are the consequences of a lack of working capital?

If you run out of working capital, you might struggle to pay bills, cover wages, or keep the business running smoothly. This can hurt profits and, in the worst case, cause the business to fail. Working capital is simply the money left over when you subtract what you owe in the short term from what you have available now -and it’s essential for day-to-day operations.

Things you should know.

¹53 days interest-free period applies to Westpac Business Mastercard when you pay off your balance in full by the payment due date. Check credit card interest-free period page for how it works.

Eligibility and lending criteria, terms and conditions apply. An establishment fee and line of credit charge may also apply. Business Lending products are only available for business and/or investment purposes and not for personal, domestic or household purposes.

Trade Finance products and services are provided by Westpac Banking Corporation (acting through its New Zealand branch) ABN 33 007 457 141, incorporated in Australia.

The material on this webpage is provided for information purposes only and is not a recommendation or opinion.

The material on this webpage does not take your particular financial situation or goal into account. We recommend you seek independent legal, financial and/or tax advice.