About the Working Capital
This working capital calculator estimates how much money your business needs to fund day-to-day operations. Enter your annual turnover and three periods — how long stock is held, how long customers take to pay and how long you take to pay suppliers — and it returns the operating cycle in days, the working capital required and an indicative bank limit.
It suits manufacturers, traders, distributors and service firms preparing for a cash credit or overdraft request, as well as accountants putting together CMA data. Owners can also use it as a health check: a lengthening operating cycle is often the first sign that cash is getting stuck in stock or receivables.
The requirement rises with turnover and with every extra day of inventory or customer credit, and falls with every day of credit your suppliers allow. Alongside the operating-cycle figure, the tool shows 20% of turnover — the thumb rule associated with the Nayak Committee that banks commonly apply to MSME working-capital limits of up to ₹5 crore.
How to use it
- 1Enter your annual turnover; use projected turnover if you want to mirror a bank's assessment.
- 2Enter the average number of days you hold inventory.
- 3Enter the number of days customers take to pay you, and the number of days you take to pay suppliers.
- 4Read the operating cycle, the working capital needed and the 20%-of-turnover bank limit.
How this is calculated
Operating cycle (days) = inventory days + receivable days − payable days. Working capital needed = (annual turnover ÷ 365) × operating cycle. Indicative bank limit = 20% of annual turnover (turnover method). The tool flags an operating cycle longer than 60 days as being on the longer side.
Frequently asked questions
How does this working capital calculator work out the requirement?
It uses the operating-cycle method. Inventory days plus receivable days minus supplier credit days gives the cycle. Your daily turnover — annual turnover divided by 365 — multiplied by that cycle is the money locked in operations at any time. It is a quick approximation; a detailed bank assessment values stock and creditors at cost.
What is the operating cycle?
It is the time between paying for materials and receiving money from customers. If you hold stock for 45 days, give customers 30 days of credit and receive 20 days from suppliers, the cycle is 55 days. The tool flags cycles longer than 60 days, because every additional day increases the funds you must arrange.
What is the 20% turnover rule shown as the bank limit?
Under the turnover method associated with the Nayak Committee, the working capital need is taken as 25% of projected annual turnover, of which the bank finances 20% and the borrower brings 5% as margin. The tool applies it to the turnover you enter and notes that it is used for MSME limits of up to ₹5 crore.
Why do the two figures differ?
One reflects your actual cycle, the other a lending norm. If your operating-cycle need is higher than 20% of turnover, a bank may ask for detailed projections to justify a larger limit, or you may need to tighten the cycle. If it is lower, you may not need the full limit the norm would allow.
How can I reduce my working-capital requirement?
Shorten the cycle. Collect advances, invoice promptly, follow up on receivables, hold less slow-moving stock and negotiate longer credit from suppliers. As the tool points out, every day saved reduces the borrowing you need. Registered micro and small enterprises can also rely on the delayed-payment provisions of the MSMED Act when buyers pay late.
Should I enter last year's turnover or projected turnover?
For a realistic view of current needs, use your latest annual turnover. To mirror how a bank sizes a limit, use the turnover you reasonably expect in the coming year, because lenders work on projected sales that they find acceptable. Avoid inflated projections; they are compared with your GST returns and past performance.