Glossary term
What is Working capital?
Short answer
Working capital is the cash a business has available to run day to day, after paying short-term bills.
Working capital, explained for tree service owners
It is the money you can use right now for fuel, wages, repairs and supplies. A tree company with low working capital can struggle after a slow month, even if the year is good. Build it by invoicing quickly, controlling costs and saving some profit. Do not spend it all on a new truck. Many owners like a cushion that covers a few weeks of costs, but the right size is a choice for you and your accountant. Watch it every month.
Related terms
- Accounts receivable
Accounts receivable is money that customers owe you for work you already finished and billed.
- Deductible
A deductible is the amount you pay yourself on a claim before your insurance starts to pay.
- Progress payment
A progress payment is a partial payment made as a long job moves along, instead of one payment at the end.
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