October 16, 2019

Truly: Working Capital Management System

Truly: Working Capital Management System

Small businesses are often resource-strapped, especially during challenging times. Managing working capital well could mean the life or death of the company. It is important for business owners to work with trusted professionals, such as accountants and bankers on these matters. But if you feel that you need to have some hands-on experience on working capital management before approaching them, I will provide you an easy-to-used tool here.

This program shows net working capital for the period of Oct 2019 - Jan 2020 in a chart form. In its first iteration to cover an immediate gap in the working capital, it will suggest the number of loans to take, starting date, loan amount, and financing period(s) required. And then it shows the net working capital position after taking the first loan(s). The program also reports the cost of borrowing to fill the gap. But in case you're not filling any gaps, but are considering using the surplus in working capital for other investment purposes, then the return on investment should at least cover the cost of borrowing.

Disclaimer. No warranty. This program is provided as is. Use it at your own risk.

A sample working capital for a small business is created in Google sheets. Data are prefilled for cash, inventory, accounts receivable, accounts payable, notes and interest payable. Net working capital is then calculated. Some assumptions are made about the data. In real situations, the data will be exported from the ERP system. The sample data (csv file) is fed into this program, where R is used to process and transform the data. Additional libraries are used for the data visualization, optimization and date calculation purposes. A linear programming method is used for the optimization purposes (finding the least cost of borrowing).

Please contact us should you want to better predict sales and plan for payments.