Guidance on Net Working Capital

searcher profile

October 12, 2021

by a searcher from Columbia University - Columbia Business School in Los Angeles, CA, USA

I am looking to determine the appropriate Net Working Capital target and unfortunately the Company is on a cash basis system. We've figured out how to deal with A/R relatively easily but A/P, Accrued Expenses and Prepaid Expenses seem fairly difficult. There are 150+ items and whether each is a prepayment, A/P, or Accrual and the terms for each is not tracked. Anyone have advice on how to calculate this and get something that is in the ballpark? Or alternative structures you've used?

2
3
153
Replies
3
commentor profile
Reply by a searcher
from The University of Texas at Austin in Des Moines, IA, USA
If you don't know whether a number on a spreadsheet is positive or negative the number is useless. Can you just send them a spreadsheet of the 150 items and have them mark if its a pre-payment, debt owed, etc? If its all sitting in their head, then it should only take about half an hour.
commentor profile
Reply by a searcher
from University of Iowa in Miami, FL, USA
Small biz accounting is really bad. So you take what they have, and give it a best guess. 80/20 rule here. You'll tie yourself in knots trying to get it perfect.

Just my $0.02!
commentor profile
+1 more reply.
Join the discussion