Your business may be growing by borrowing money it does not know it is borrowing.

• The accountant's meaning: current assets less current liabilities
• The owner's meaning: money tied up in stock, unpaid bills and running costs
• Why the two are related but not identical
• Why a business can be “asset rich” and still short of cash
• Where working capital sits in the statements the CA prepares

Where the terms differ, the session uses the owner's meaning and says so each time.

A worked example uses made-up round numbers: a trader holds ₹3,00,000 of stock and sells ₹30,000 of it (at cost) each week, so the stock covers about ten weeks.

• Stock value divided by cost of goods sold, times the days in the period
• Fast-moving and slow-moving items counted separately
• Dead stock: what it is really costing in tied-up money
• Buying in bulk for a discount, and what the discount really costs
• For service businesses: work in progress and unbilled work

• Unpaid customer bills divided by credit sales, times the days in the period
• The difference between the terms you agreed and the days actually taken
• Which customers pull the average up
• The cost of each extra week of waiting, in money tied up
• Time limits in the MSMED Act for payments to micro and small suppliers

The Act's rules on payment periods and interest are covered in the Getting Paid session; here the point is to know your real number.

• Unpaid supplier bills divided by purchases, times the days in the period
• Terms you agreed against the days you actually take
• What stretching suppliers costs in goodwill and in price
• Early-payment discounts: when taking one is cheaper than waiting
• What must never be late: wages and statutory dues

Worked example, all figures made up: if the three numbers come to 60 days and the business sells ₹3,00,000 a month, roughly ₹6,00,000 is tied up. Grow sales by a fifth and the tied-up amount grows by about a fifth, before any profit has arrived.

• Days of stock plus days to collect, less days to pay
• What that number means in rupees at your current sales
• Why the same number needs more money when sales rise
• Seasonal peaks, when the gap is at its widest
• Reading one month's figures against the previous three

• Hold less stock, or stock the right items
• Collect sooner: terms agreed in writing, invoice on time, follow up before the due date
• Pay later, within what suppliers will accept
• Ask for part-payment in advance on large orders
• Pick one lever, because changing five at once teaches you nothing

A lever that damages the customer relationship or the supplier relationship is not free.

• Why working capital should be funded with money that can be repaid on the same rhythm
• Own money, supplier credit, customer advances and bank finance, in outline
• Why long-term needs should not sit on short-term money
• What to ask a bank, and when a CA should be in the room
• The two dedicated sessions on working-capital loans and on invoice discounting