Working capital calculator: formula and working capital days

Your working capital requirement is calculated as follows: working capital = average stock + trade receivables − trade payables. To express it in working capital days, divide it by your annual revenue excluding VAT, then multiply by 365. In our fictional example, €336,000 of working capital for €1,825,000 of revenue means 67.2 days of sales to finance. The calculator above runs the numbers with your figures and shows what each day gained on your customers is worth.

What working capital measures

Between the moment you pay for your purchases and the moment your customers pay you, the business has to be financed. Working capital measures that amount. In France it is called BFR (besoin en fonds de roulement), and it is tied up in three items:

• stock: goods bought but not yet sold;
• trade receivables: sales invoiced but not yet collected;
• trade payables: purchases received but not yet paid. They work the other way: your supplier is lending to you.

A positive requirement has to be financed: equity, loans, overdraft. A negative one means your customers pay you before you pay your suppliers: your operating cycle generates cash.

The working capital formula in euros

For day-to-day management, the short formula is enough. Each item comes from an average payment term:

DSO stands for days sales outstanding, DPO for days payable outstanding. Four points to keep in mind.

With or without VAT. Your customers pay you including VAT, and you pay your suppliers including VAT. Bpifrance Création therefore recommends counting receivables and payables including VAT: the gap between the VAT you collect and the VAT you pay back increases the requirement. Stock stays excluding VAT. If you invoice without VAT (exports, for example), untick the VAT box in the calculator above.

365 or 360 days. Bpifrance Création uses 365 days. Some guides use 360, the so-called commercial year. The difference is small, about 1.4%. Pick one basis and stick to it: the trend is what matters.

The balance-sheet version. Your accountant calculates working capital from the balance sheet. Agicap gives the full form: stock and work in progress, plus trade receivables, minus trade payables, minus tax and social liabilities. It is more complete, but it only comes once a year. The short formula can be recalculated every month from your software.

Service businesses. No stock, but work in progress: time spent on assignments not yet invoiced. Bpifrance Création puts it in place of stock, and deducts deposits received from customers.

Working capital days

An amount in euros grows with your business. To see whether your working capital is really getting worse, express it in days of revenue:

Working capital days = working capital ÷ annual revenue excluding VAT × 365

This figure answers a simple question: how many days of sales do you have to advance before you get paid? If it goes from 60 to 70 days while your sales are growing, growth is not the cause: your payment terms are drifting.

It also breaks down item by item. Divide each amount by one day of revenue excluding VAT (annual revenue ÷ 365): you get stock days, receivable days and payable days, which add and subtract just like the euros.

Fictional example: a wholesale SME

Take an SME distributing supplies, with round numbers so the calculation is easy to follow. All data are fictional.

Step by step:

1. One day of sales including VAT is worth 1,825,000 × 1.2 ÷ 365 = €6,000.
2. Trade receivables: €6,000 × 55 days = €330,000.
3. One day of purchases including VAT is worth 1,095,000 × 1.2 ÷ 365 = €3,600.
4. Trade payables: €3,600 × 40 days = €144,000.
5. Working capital: 150,000 + 330,000 − 144,000 = €336,000.
6. In days of revenue: 336,000 ÷ 1,825,000 × 365 = 67.2 days.

The same example, item by item. One day of revenue excluding VAT is worth €5,000.

The reading is immediate: receivables weigh more than twice as much as stock. That is where to act first.

Another consequence: with unchanged payment terms, working capital follows revenue. If this company sells 20% more next year, and its purchases and stock follow, its working capital rises to €403,200. It has to find €67,200 of cash just to grow.

The levers: what one day is worth

Each day gained on a payment term frees a precise amount of cash. It is the most concrete way to decide where to start.

With these three actions, the example’s working capital falls to €228,000, or 45.6 days of revenue. The calculator above works out the customer lever with your own figures.

Customer days: the most profitable lever

In most SMEs, receivables are the heaviest item. The actions cost little:

• Invoice on the day of delivery, not at month end. The legal term runs from the invoice date: every day of late invoicing adds to your customer days.
• Write your payment terms on the quote, the terms and conditions of sale and the invoice.
• Ask for a deposit on large orders.
• Follow up before the due date, not after: a reminder a few days before, a call the day after if nothing has arrived.
• Offer direct debit for recurring sales.
• Read the aged receivables report every week: the list of unpaid invoices, sorted by how late they are.

Supplier days: negotiate, don’t stretch

Extending supplier days also frees cash, but within the law and without damaging the relationship. A supplier paid late is entitled to penalties, and the authorities can impose fines (see below). The clean lever is negotiation: longer terms in exchange for volume, a commitment or grouped orders.

Stock: find the items that don’t move

In the example, stock represents 50 days of purchases (€150,000 ÷ €3,000). Gains rarely come from an across-the-board cut. They come from items that don’t turn over: rank your products by months of stock, spot the ones above your threshold, adjust reorder points. Measuring stock in days of purchases is an approximation; the exact calculation uses the cost of goods sold.

Legal payment terms in France

Your levers have a limit: the law. The caps, often called “LME terms”, are set out in Article L441-10 of the French Commercial Code (Code de commerce), as rewritten by an ordinance of 24 April 2019. Between businesses:

• with no clause in the contract, payment is due 30 days after receipt of the goods or performance of the service;
• the agreed term cannot exceed 60 days from the invoice date;
• by way of exception, the parties can agree on 45 days end of month from the invoice date, if the contract expressly provides for it and it is not a manifest abuse against the creditor;
• for periodic invoices (summary invoices), the term cannot exceed 45 days from the invoice date.

Article L441-11 sets other caps for certain sectors. A few examples:

• road haulage, vehicle rental, freight forwarding: 30 days from the invoice date;
• perishable food products: 30 days after delivery;
• live cattle for slaughter and the fresh meat derived from it: 20 days after delivery;
• alcoholic beverages: 30 days after the end of the month of delivery.

If payment is late, penalties are due without any reminder. Unless the contract sets another rate, the rate is the European Central Bank’s rate plus 10 percentage points; a contractual rate cannot be lower than three times the French legal interest rate. A fixed indemnity for recovery costs is added, its amount set by decree.

On enforcement, Article L441-16 provides for an administrative fine of up to €75,000 for an individual and €2 million for a company. These caps double for a repeat breach within two years of a first sanction becoming final.

Légifrance shows that the current version of Articles L441-10 and L441-11 applies until 1 January 2027. Check the text in force before drafting your terms and conditions.

Where do French companies stand? According to the Banque de France, customer and supplier payment terms both fell by 1.5 days in 2024. But fewer than one large company in two meets the 60-day term. Without late payments, SMEs and micro-businesses would have had €13 billion of additional cash.

Common mistakes

1. Mixing figures with and without VAT. In the example, calculating everything excluding VAT gives €305,000 instead of €336,000: €31,000 of requirement goes unnoticed.
2. Relying on the balance sheet alone. The balance sheet is a snapshot on closing day, often a quiet month. A seasonal business can have a much higher requirement just before its peak season.
3. Tracking the amount without the days. Working capital that rises with sales is normal. Working capital days that rise are a warning.
4. Confusing the requirement with long-term funding. Long-term funding (fonds de roulement in French) is the stable resources (equity, loans) left once fixed assets are financed. Net cash is that funding minus the working capital requirement.
5. Settling for an average. Average customer days of 55 can hide a large customer at 90 days. The aged receivables report shows it; the average does not.
6. Paying suppliers late to compensate. The gain is real, but it exposes you to penalties, fines and less accommodating suppliers.
7. Forgetting deposits and work in progress in a service business.

Tracking working capital monthly in a dashboard

Agicap recommends reviewing working capital at least every three months. We prefer every month. In the example, five days of drift on customers ties up €30,000, and a quarter is long enough to lose sight of it.

Useful tracking fits on one screen:

• working capital in euros and in days of revenue, over a rolling twelve months, with its trend;
• customer days, supplier days and stock days, each against your target;
• aged receivables: not yet due, under 30 days late, 30 to 60 days late, over 60 days late;
• the ten largest overdue amounts, with the customer, the amount and the date of the last reminder;
• an alert written in words when an indicator goes past its target.

The data already exist. Invoicing and accounting give you receivables and payables, your sales management software gives you stock, the bank gives you collections. The work is to bring them together every month, with definitions written down once and for all. For example, monthly customer days: trade receivables including VAT at month end ÷ revenue including VAT over the last twelve months × 365.

You can see what this tracking looks like in the fictional cash and working capital dashboard in our demos. To choose the other figures to follow, read our article on the KPIs of a small business dashboard.

FAQ

Is negative working capital good news?

Often, yes: your customers pay before you pay your suppliers, as in a shop paid at the till. But if sales slow down, that surplus shrinks fast. Watch it as closely as a positive requirement.

Should I calculate working capital with or without VAT?

Receivables and payables including VAT, stock excluding VAT, as Bpifrance Création recommends. Working capital days are then calculated on revenue excluding VAT.

What is the difference between working capital and long-term funding?

The working capital requirement is the need created by the operating cycle. Long-term funding is the stable resource available to cover it. If it is lower than the requirement, the gap is financed short term, with an overdraft for example.

How many working capital days is normal?

It depends on the sector: a shop paid at the till does not have the working capital of a manufacturer. Compare yourself with yourself first, month after month. A rise of a few days with no known reason deserves an explanation.

Are my figures sent anywhere?

No. The calculator above runs in your browser; nothing is transmitted.

From one calculation to monthly tracking

Calculating your working capital once is enlightening. Tracking it every month changes decisions: chase this customer, renegotiate with that supplier, clear that product line.

If you want this tracking connected to your software, that is what we do at KAVDAL. We start with a data diagnostic at €290, guaranteed and deducted if a project follows, then a first dashboard from €1,500. Net prices, VAT not applicable, art. 293 B of the French General Tax Code (CGI). Details are on our pricing page, and market prices in our article on how much a dashboard costs a small business. The first call is free and lasts 20 minutes.