Pay your bills, avoid bankruptcy: A guide to working capital for startups

To make cash collection faster, you could either shorten the payment period

In its simplest sense, working capital means a company’s ability to pay for its dues when it comes due. This sounds super easy, but it’s actually one of the main reasons why a lot of companies end up bankrupt.

For startups especially, it’s a key pain point for those that deal with corporates, large businesses, and government entities, as it means dealing with their extended payment terms.

Managing working capital well can be helpful in at least two ways: it creates transparency in liquidity positions and it helps minimize the cost of short-term borrowings to fill the liquidity gap.

Liquidity