Charles Leikauf breaks down working capital into three parts: money customers owe you, money you owe suppliers, and inventory. Optimizing these three levers—collecting faster, paying slower, and holding the right stock—frees up cash without needing more revenue.
So there's something called working capital. Working capital is accounts receivable, meaning money that people owe you, accounts payable, money you owe other people, and inventory. Inventory is the widgets you have to sell, right? If I were to take off my shoe and say, this is the shoe that I'm selling, how many do I have? And so when you optimize working capital, it's how much money does it take to like run the business? Like how much money do you actually need to keep in it to like keep it alive, right? Do you keep $50,000 or $100,000 or $500,000 in their checking account? Who knows? You can help them figure out as a fractional CFO. Now, one of the easiest ways to do that is if the business needs $100,000 in their checking account just to coming in, whatever else. If you were able to cut that number in half, what you are able to do is you can help that business owner write himself a check for $50,000 or $100,000 by cutting that number in half. How do we do that? Well, accounts receivable, we need to collect sooner, right? And you can help a client do that. Accounts payable, you want them to be able to pay later. And inventory, how do we have the right amount of inventory? We have tons of trainings called CFO Mastery that we can show you if you ever want to go through any more details. That's what I highly recommend you get into if you need more help doing any of those things. I'm Charles Leikauf. I own Profit Search Group. I'll see you on the next one.
