Working Capital
Working capital is current assets minus current liabilities: cash, inventory, receivables and reserves, less payables, credit cards and short-term debt. It's the fuel that funds the gap between paying for inventory and collecting from customers. For ecommerce that gap is long, often 60 to 150 days from supplier deposit to marketplace payout, which is why fast-growing profitable sellers run out of cash: growth demands working capital faster than profit supplies it.
Put numbers on the trap. A brand doing $200,000 a month at a 12% net margin generates $24,000 of monthly profit. To double revenue, it needs roughly double the inventory in the pipeline, and if inventory on hand plus on order runs $350,000, doubling means finding another $350,000, which is fourteen months of profit. The business is profitable and cash-starved at the same time. That's not mismanagement; it's arithmetic, and it's why inventory brands raise debt to grow.
Managing it starts with seeing it: a current balance sheet, inventory valued correctly, and a cash forecast built off real payment terms. Lenders underwriting inventory lines ask for exactly those documents, and books that produce them quickly get better terms. That visibility is a standing output of monthly bookkeeping, with the cash timing covered in the cash flow statement.
Where this shows up in our work
This isn’t textbook material for us; it’s the day-to-day of keeping seller books right. See how we handle it in practice:
Monthly Ecommerce Bookkeeping→