One or two places where what you measure could really matter. Cash flow is the lifeblood of any business. Whether youre selling tires at the local tire center, you run a small restaurant, or even a dry cleaner like the example above, without working capital, your operations could grind to a halt. What are the business metrics? Working capital The formula accountants use to describe working capital is Current assets – Liabilities Working capital If you divide the value of your current liabilities into your current assets, youll come up with a ratio — the goal should be to shoot for twice as many assets as you have liabilities.

But most small businesses arent able to do that. Anything below should be a red flag that you have negative working capital — even if you have USA WhatsApp Number List cash flow in the bank at the end of the month. In other words, if the ratio drops below , you could be on a slow march to going out of business if the trend persists. If you are uncertain about your current assets and your current liabilities, you should talk to your accountant, CPA, or other trusted business financial advisor to make sure you are clear.

Working capital is not the same thing as cash in the bank. metric that will signal whether or not you have the capital you need for day-to-day operations, it will also help you make informed decisions regarding whether or not a small business loan makes sense, if purchasing that new piece of equipment is a good idea, or maybe even help you know if your revenues are headed in the wrong direction. Cash in the bank Every business should try to maintain some cash in the bank. In much the same way my grandmother used to encourage me to keep a rainy-day fund, its a smart idea for business owners to keep some cash on hand to cover emergency expenses, bridge a short-term cash flow gap.