What working capital is, and how much your business needs

Working capital is the money you have to run the business day to day. Here's how to tell if you have enough, and what to do when you don't.

Working capital in plain words

Accountants define working capital as current assets minus current liabilities. In plain words: the cash you have, plus money you'll collect soon, minus the bills you owe soon. It's what keeps the lights on between the day you pay for things and the day customers pay you.

A business can be profitable on paper and still run short. A dental office might do great work in March and not see the insurance money until April, because a clean claim can take 14 to 30 days for a decision. An auto shop buys parts today for a job it bills next week. The profit is real, but the cash shows up late.

How much is enough? Count it in days

An easy way to measure your cushion is "cash buffer days": how many days you could keep paying your bills if no money came in.

1. Add up what went out of your business account last month: payroll, rent, suppliers, everything.
2. Divide by 30 to get your average daily spending.
3. Divide the cash in your account today by that daily number.

Example: $45,000 went out last month, so about $1,500 a day. You have $30,000 in the bank. $30,000 divided by $1,500 is 20 days.

For comparison, a 2016 JPMorgan Chase Institute study found that the median small business held 27 cash buffer days. Restaurants had about 16 days, and labor-intensive businesses such as repair shops and personal services had about 23. The top quarter of businesses had 62 days or more. Those are historical benchmarks, not a target for every business.

There's no perfect number. Compare your cushion with the bills and slow periods ahead, not just an industry average.

Why working capital runs short

• Costs went up faster than prices. Rising costs of goods, services and wages were the most common financial challenge in the Federal Reserve’s 2026 survey of small employers.
• Customers or insurers pay late. You’ve done the work, but the money is weeks out.
• You’re growing. A new hire, a bigger order or a second location takes cash before it brings any in.
• Something breaks. A walk-in cooler, a lift or a dental chair doesn’t wait for a good month.

Ways to build it back up

1. Get paid faster. Send invoices the day the work is done, take card payments, and follow up on insurance claims before they age.
2. Pay on your schedule. Use the full terms suppliers give you, without paying late.
3. Keep a reserve. Set aside a fixed share of every deposit in busy months.
4. Use outside funding for short, clear gaps, not to cover losses that keep coming back.

How Zippi business funding fits

Zippi is a direct funder. Owners use its business funding for working capital: payroll, inventory, rent, repairs or a busy season. Funding goes up to $500,000, with no hard credit check, and can arrive in hours. Repayment can be a fixed daily or weekly amount, or a share of daily or weekly sales, taken from your business bank account. The amount and terms depend on your business.

To apply, your business needs at least $20,000 in sales every month, at least 12 months in business, and 3 to 4 months of recent bank statements.

See how owners use funding in restaurants, auto shops, dental practices and nail salons.

Quick answers

Is working capital the same as cash? Not quite. Cash is part of it. Working capital also counts money you're owed soon and bills you owe soon.

Can working capital be negative? Yes, if you owe more in the short term than you have and expect to collect. That's a sign to act before a bill comes due.

What can I use working capital funding for? Day-to-day costs like payroll, inventory, rent and repairs.

Sources: Zentist (dental claim timing); JPMorgan Chase Institute (cash buffer days, 2015 transactions published in 2016); Federal Reserve Small Business Credit Survey (2026 report).

Photo: Pexels. Stock image, not a Zippi customer.