Frequently Asked Questions (FAQ)

How can a company improve your working capital cycle?
Any action that will shorten the amount of time you’re waiting on invoices to be paid is going to help your working capital cycle. This could mean dropping clients that never pay on time and taking on larger accounts with a record of paying promptly.

Additionally, any way you can reduce the time it takes you to pay creditors will also be helpful. This could mean taking on short-term financing to pay bills or paying with reserves you have in your business account.
What affects the working capital cycle?
Supply and demand, holidays, and seasons all affect your working capital cycle. Since you may need different types and amounts of inventory throughout the year, your number will change by how much of your product you plan to sell and how quickly you’ll get paid. If, after Christmas, your inventory needs drop, your WCC is going to be much different than right before Christmas when everyone is ordering but may not be paying until after the holiday season.
Can working capital cycle fluctuations be seasonal?
Yes, seasons will absolutely affect your WCC. You’ll not only need a larger inventory, but you’ll be tracking down payments from customers during a very busy season. Compared to slower parts of the year, your WCC might fluctuate quite drastically.

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

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