{"id":20152,"date":"2026-03-24T14:23:05","date_gmt":"2026-03-24T14:23:05","guid":{"rendered":"https:\/\/www.moorethompson.co.uk\/specialist-sectors-blog\/?p=20152"},"modified":"2026-03-24T14:23:10","modified_gmt":"2026-03-24T14:23:10","slug":"when-is-working-capital-good-and-when-is-it-bad-for-businesses","status":"publish","type":"post","link":"https:\/\/www.moorethompson.co.uk\/specialist-sectors-blog\/when-is-working-capital-good-and-when-is-it-bad-for-businesses\/","title":{"rendered":"When is working capital good and when is it bad for businesses?"},"content":{"rendered":"

By Mark Hildred, Managing Partner<\/em><\/p>\n

Working capital is often seen as a sign that a business is doing well.<\/p>\n

<\/p>\n

This is not inaccurate, but it is far from the whole truth.<\/p>\n

As the global economic situation becomes increasingly complex, it is best to understand how to manage working capital and whether it is a help or a hindrance.<\/p>\n

What is working capital?<\/strong><\/h3>\n

Working capital is the amount of money that a business has once the current liabilities are removed from the current assets.<\/p>\n

Assets will typically include the inventory of a business, but can also include things like accounts receivable and unpaid customer bills.<\/p>\n

On the other hand, liabilities are accounts payable and any debts that your business has outstanding.<\/p>\n

The amount of working capital a business has is a direct measure of financial dynamism, but it is possible to have too much of a good thing in this instance.<\/p>\n

Why would too much working capital be a bad thing?<\/strong><\/h3>\n

Having working capital shows that you are able to manage your liabilities effectively and have a good handle on generating assets.<\/p>\n

Keeping some working capital to one side lets you brace for economic hardship and it can act as a buffer if your cash flow drops and the liabilities begin to eat away at your assets.<\/p>\n

However, money that is just sitting around is seldom a good thing to have.<\/p>\n

Instead, working capital is the key to business growth as it can be invested into the business to pave the way for greater opportunities.<\/p>\n

It is vital that this is done effectively, as good investments lead to businesses blossoming while bad investments can leave you high and dry.<\/p>\n

If you are seeking support from external investors, the amount of working capital you have will determine how much money they are willing to invest.<\/p>\n

Have too little and it may be considered that your business is struggling, while having too much shows that you lack confidence in your business.<\/p>\n

If you are not ready to invest money into your company, then why would you expect anyone else to take that risk?<\/p>\n

As such, managing working capital is one of the great tightrope walks of business ownership and should be managed in tandem with professional financial advice.<\/p>\n

Our team can help you manage your budgets effectively so that you can better leverage your working capital.<\/p>\n

Rather than letting it become a burden, your working capital can pave the way to growth and future success.<\/p>\n

Speak to our team today<\/strong><\/a> to find out how to effectively manage your working capital.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

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