3 Things You Must Do Before Applying For Business Finance

3 THINGS YOU MUST DO BEFORE APPLYING FOR BUSINESS FINANCE Funding and Business Growth Playbook T: 0330 350 3356 @: hello@GrowingYourNumbers.com www: growingyournumbers.com

Stock Days: This is the total Cash, or Working Capital tied up in your business.

Cash Tied Up in Your Business

Do you know much cash you have tied up in your business and in what format?

Let’s use a manufacturing business to clarify, (if you are not running a manufacturing business, this is still relevant to you). Manufacturers purchase raw materials, or Stock. However, they invest time and labour converting raw materials into a finished product, typically referred to as Work In Progress. Work In Progress must be paid for in the same way as physical Stock or Inventory must be paid for. For example, Alex ’s Software Company employs people to work on customer projects. The working capital tied up in Stock includes both Stock and Work In Progress or WIP. Before the business can realise a profit, the finished product must be sold and even then, the cash does not land in the company’s bank account, if they are offering credit there is a further delay before they realise their profit.

The delay between acquiring and paying for the raw materials and labour that make up the finished product, and converting the finished product into cash, hopefully at a profit can become extremely protracted.

In an ideal world, the less cash you have tied up in your business the better, however, this is often easier said than done due to timing issues.

This introduces another variable into our financial management processes, time, which is why Creditors, Debtors and Stock are measured in days.

Stock & Work in Progress => Working Capital

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