Calculate financing costs

Working capital is the amount of money a company needs to run its daily operations. It covers maintaining inventory, financing accounts receivable, and paying running costs before receiving payments from customers. According to the Federation of Finnish Enterprises SME barometer, over 30% of Finnish SMEs consider working capital adequacy their most significant financial challenge.

Working capital need is calculated using the traditional formula: inventory + accounts receivable - accounts payable. This gives net working capital, which tells you how much money is tied up in the company's operational activities. For example: if your inventory value is EUR 50,000, accounts receivable EUR 80,000, and accounts payable EUR 40,000, your net working capital is EUR 90,000.

Our working capital calculator helps you understand how much capital your company needs for smooth operations. The calculator takes into account accounts receivable turnover (DSO), inventory turnover rate, and accounts payable terms. As a result, you get a euro-denominated working capital need and comparison to your industry averages.

Working capital management is especially important for growing companies. According to Finnvera statistics, in fast-growing companies, working capital needs can increase by up to 50% per year – much faster than revenue. This is because growth requires larger inventories, generates more accounts receivable, and requires advance investments before revenue financing catches up.

In Finnish SMEs, working capital management is particularly critical because access to business financing has tightened due to banking regulation. When bank loans are harder to obtain, the company's own working capital management becomes more important. Well-managed working capital reduces the need for external financing and improves the company's negotiating position with financiers.

Working capital needs vary significantly by industry. In retail and wholesale, a large portion of capital is tied up in inventory – typically 20–35% of revenue. In service industries such as consulting and IT, working capital needs are smaller (5–15%) because there is no inventory, but accounts receivable can be significant due to long project billing cycles.

In manufacturing, working capital needs in Finland are typically 25–40% of revenue. Raw materials, work in progress, and finished goods tie up capital, and customer payment terms are often 45–90 days. In mechanical engineering and export companies, the situation is particularly challenging as export customer payment terms can be up to 120 days.

There are several concrete ways to optimize working capital. Shortening the accounts receivable cycle (DSO) by even a few days can free up significant capital: if your revenue is one million euros per year, a one-day DSO improvement frees approximately EUR 2,740. A ten-day improvement means nearly EUR 27,400 in free capital.

Inventory optimization is another effective method. The just-in-time principle, better demand forecasting, and identifying slow-moving products can reduce capital tied up in inventory by 10–30%. At the same time, fully utilizing accounts payable terms – paying invoices only on the due date, not earlier – increases available capital.