WCR Calculator
- Calculate your WCR in just a few clicks
- Get the amount your business needs instantly
- Visualize the WCR/sales ratio
Working capital requirement, also known as WCR or operating working capital requirement, is the central element in your company's financial management. This indicator precisely measures the resources needed to finance your operating cycle before you receive your sales. It reflects the day-to-day reality of many companies that need to advance funds in order to operate, whether to build up inventories, pay suppliers or extend payment terms to customers.
The cash flow cycle and payment timing differences can put a significant strain on your cash flow. To illustrate this phenomenon :
ℹ️ A manufacturing company buys its raw materials on a 30-day basis, but grants 60 days' customer credit. During this interim period of 30 days, the company has to self-finance its operations, manage its inventory and cover its expenses without having received any sales.
Controlling working capital requirements is a major challenge for any company concerned about its financial health. Regular analysis of this indicator enables you to anticipate cash requirements and avoid critical situations that could jeopardize business continuity.
The main advantages of good working capital management are :
ℹ️ In the e-commerce sector, for example, working capital management becomes particularly critical during peak periods. A company often needs to build up its inventory several months before the peak season, creating a temporary but substantial financing requirement.
The calculation of working capital requirements is based on a simple but essential formula: WCR = (Inventory value + Accounts receivable) - Accounts payable. This equation takes into account all the elements that influence your operating cycle.
To fully understand each component, let's look at their role:
Inventories represent all the goods your company holds for its business. Their value has a direct impact on your WCR, as they represent fixed assets that have yet to generate income. Trade receivables represent the sums your customers owe you, while trade payables represent what you owe your own suppliers.
ℹ️ Consider an SME in the industrial sector: with €100,000 in inventory, €75,000 in outstanding customer invoices and €45,000 in supplier debts, its WCR amounts to €130,000. This amount reveals a significant need for financing to maintain business activity.
A positive WCR indicates that your company needs to mobilize financial resources to support its operating cycle. This situation, common in many business sectors, calls for special attention to cash flow management. It often implies the implementation of appropriate financing solutions to maintain a healthy cash position.
When your WCR is negative, it means that your operating cycle naturally generates cash. This favorable configuration is mainly found in the service or digital sectors, where customers often pay before the service is rendered. It offers greater financial flexibility and investment opportunities.
Improving your working capital requirement requires rigorous management of its various components. A structured approach enables you to identify and activate the levers that are most relevant to your business.
Inventory management is the first major area for optimization. It involves striking a delicate balance between the availability of products and the financial capital they represent. A detailed analysis of your stock rotation and sales forecasts enables you to gradually refine this balance.
Customer receivables also represent an important lever. Here are a few concrete actions to optimize it:
To meet your operating financing needs, we have developed Karmen Loan, an innovative solution that adapts to your company's specific requirements. Our offer stands out for its flexibility and speed of implementation, with financing ranging from €30K to €5M over terms of 1 to 24 months.
This solution allows you to:Efficiently finance your inventories and suppliesCover your seasonal working capital needsSupport your commercial growthInvest in your development
Working capital requirements are a strategic indicator of your company's financial management. Controlling it determines your ability to generate sustainable growth while maintaining a balanced cash flow. Proactive working capital management, combined with tailored financing solutions like Karmen Loan, enables you to transform cash flow constraints into development opportunities.
