CFO & Strategy
Working Capital Management for Startups: AR, AP, and Cash Conversion
Collated by Paul Jung, CFA
Curated by Rubric Financial
1 / 7
What Working Capital Is + Why It Matters
- Working Capital = Current Assets (cash, AR, inventory) − Current Liabilities (AP, accrued expenses, short-term debt). Net positive = healthy; net negative = pressure.
- Investors and lenders look at working capital trends as a leading indicator: deteriorating working capital often precedes a cash crisis by 2-3 quarters.
- For SaaS companies: working capital is dominated by AR (customers who haven't paid yet) and deferred revenue (cash you've received but haven't earned yet). For physical-goods companies: inventory + AR + AP.
- Optimizing working capital can effectively extend runway by 3-9 months without any revenue or expense changes. Free money for operations.
Related Resources
CFO & Strategy
Startup KPIs Every Founder Should Track
A comprehensive guide to the financial and operational KPIs that investors expect founders to know and track from day one.
CFO & StrategyVC Capital Isn't Fuel — It's a Timer
Why taking venture capital commits you to a growth-at-all-costs trajectory — and how bootstrapped founders often build more personal wealth with less stress.
CFO & StrategyIncentive Alignment in Startups
How to align incentives across founders, employees, and investors so everyone is pulling in the same direction — through equity structure, compensation design, and governance.
