I used to think this was something complicated and only applicable to large companies, but thanks to advice from a forum user, I realized the methodology is quite straightforward and truly applicable even to small businesses. Specifically, I learned that it’s important to consider not only inventory and accounts receivable, but also accounts payable, to accurately assess how many days funds are actually “frozen.” I tried calculating it for my company and was surprised at how much more accurately I could see my actual cash flow. Now I can predict the best time to order goods and plan payments, which significantly improves the financial stability of my business. Frankly, I rarely thought about such metrics before, but now I understand that this is a simple and powerful tool for financial control.
