How to Improve Working Capital: 7 Questions Every Malaysian Business Owner Must Answer

The cash in your business feels tight. But here’s the thing — you probably already have the money you need.

It's just trapped.

Trapped in slow-paying clients. Dead inventory. Unused equipment.

These 10 questions will help you find it and free it up so you can improve working capital:

Question 1: How many months can you survive with zero new sales?

This is your runway. It tells you how much time you have to fix problems before you run out of cash.

Runway = Cash in Bank ÷ Monthly Expenses.

Recommended minimum: 6 months.

Below 3 months = danger zone.

Open your bank statement. Add up last month's total expenses (rent, salaries, utilities, loan payments, everything).

Divide your current cash balance by that number. What’s your number?

Question 2: What percentage of your receivables are over 60 days old?

Receivables over 60 days are slow-moving cash. The longer they age, the less likely you'll collect them.

Start tracking it monthly. Chase any invoice over 45 days immediately.

Question 3: How long does it actually take clients to pay you?

Your payment terms might say Net 30, but if clients actually pay in 60 days, that's your reality.

The gap between terms and reality is where cash gets stuck.

Track when you issue invoices and when payment actually arrives. Average it over the last 3 months.

If it's over 60 days, tighten your collections process (chase earlier, offer early payment discounts, negotiate better terms).

Question 4: What's your Sales-to-Receivables ratio?

This tells you how efficiently you're converting sales into cash.

Use this formula: Annual Sales ÷ Total Receivables

0-4 = bad (you're funding your clients' operations)

4-8 = acceptable

Above 8 = healthy

Alternate calculation method: Calculate your annual sales (or rolling 12-month sales). Divide by your current total receivables.

If the ratio is below 4, you have too much cash tied up in receivables. Chase overdue invoices aggressively.

Question 5: How much cash is tied up in inventory right now?

Inventory is cash sitting on a shelf. If it's not moving, it's not working for you.

If you're holding 6+ months of inventory, you're tying up too much cash.

Count your current inventory value (what you paid for it, not what you'll sell it for). If it's more than 3 months' worth of sales, you're overstocked.

Switch to just-in-time ordering. Order smaller quantities more frequently.

Question 6: What's your true monthly burn rate?

Don’t think of burn rate as the "total expenses." Think of it as the expenses you must pay even if sales drop to zero.

Knowing your monthly burn rate tells you how much runway you actually have.

List every monthly expense. Mark each as:

• Non-negotiable (must pay to keep operating)

• Negotiable (could cut or delay if needed)

Add up the non-negotiables. That's your true burn rate.

If it's more than 70% of revenue, you're running on thin margins.

Question 7: What percentage of your revenue comes from your top 3 clients?

If 60-80% of revenue comes from 2-3 clients, your cash flow is at their mercy.

One late payment, one lost client = cash crisis.

Identify your top 3 clients by revenue. Add up their total and divide by your total revenue. If it's over 50%, actively work to diversify your client base.

If you can answer most of these questions right now, you're ahead of 80% of business owners. If you can't, now you know how to improve working capital

Want the full system for managing cash flow?

I'm hosting a free webinar: "How to Boost, Preserve, and Future-Proof Your Cash Flow" — where I break down how to control cash in your business, even during tough times.

Get notified when registration opens: https://douglasloh-associates.kit.com/boostcashflow

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