Both working capital and cash flow are of critical importance to your small business, and it’s extremely necessary that you have positive balances on both. The differences between these two business terms amount to a difference in their scope. Whereas cash flow primarily looks at income and expenditures, working capital takes a broader look at a company’s total assets and debts and determines its ability to meet financial obligations.

Cash Flow

Cash flow is the amount of money a business is capable of generating during a specific time frame such as a week or a month. It’s an indicator of how much money is being brought in, as compared to how much money is flowing out. Money that is brought in is in the form of incoming revenues, such as from sales. Money going out is in the form of business expenses which are needed for day-to-day operations, to purchase additional inventory, meet the payroll, and sometimes also for the repayment of debts. Cash flow also will determine how much money you have available for reinvestment in the business.

Working Capital

Working capital is a figure which demonstrates your company’s ability to repay those liabilities it’s currently faced with. Working capital will always fluctuate over time, which means that it is not a good measurement for making any kind of future projections of your company’s success. Working capital amounts to a quick way of evaluating whether or not your company has a positive cash balance. It can be used for a variety of important business purposes, and it is critical for helping to maintain positive cash flow.

Does your small business have a positive cash flow?

Cash flow is literally the lifeblood of any business, and if your small business lacks positive cash flow, you’re probably experiencing some severe constraints on your budget. Contact us at Impact Commercial Capital, so we can explore some possibilities for improving your cash flow, and keeping your business consistently profitable.