How much cash does your operating cycle tie up?
Estimate your working capital requirement (BFR) in euros and in days of revenue, your net cash position and a clear diagnosis in seconds.
Working Capital (BFR) & net cash simulator
Measure the cash your operating cycle ties up, in euros and in days of revenue, and your net cash position.
Used to express the BFR in days of revenue
Unpaid customer invoices
Unpaid supplier invoices
VAT, payroll and social contributions payable
Indicative figures based on a closing snapshot. The BFR fluctuates with seasonality: reason on an average outstanding balance.
Your operating BFR
Quick answer
How do you calculate working capital requirement (BFR)?
Operating working capital requirement (besoin en fonds de roulement, BFR) = inventory + trade receivables (incl. VAT) + other operating receivables − trade payables (incl. VAT) − tax and social liabilities. Example: €50,000 of inventory, €120,000 of receivables, €80,000 of trade payables and €20,000 of tax and social liabilities give a BFR of €70,000. Against €600,000 of revenue excl. VAT, that is 70,000 ÷ 600,000 × 365 = 42.6 days of revenue to finance.
- Operating BFR
- Inventory + receivables − operating payables
- BFR in days of revenue
- BFR ÷ revenue excl. VAT × 365
- Net cash position
- Net working capital − BFR
Reviewed by Samuel Hayot, chartered accountant (Ordre des experts-comptables), last updated
BFR, net working capital and net cash: what each measures
The working capital requirement (BFR) is the cash tied up by the operating cycle: you buy, store, produce and invoice before being paid, while suppliers, the tax office and Urssaf give you shorter terms. That permanent gap between cash out and cash in has to be financed. A positive BFR is a need; a negative BFR (cash retail, subscriptions paid upfront) is a source of cash. It is close to the English notion of net operating working capital.
Net working capital (fonds de roulement net global, FRNG) is the structural answer to that need: long-term capital (equity + debt due in more than one year) − fixed assets. It is the cushion of stable resources left once investments are funded.
Net cash follows mechanically: net cash = FRNG − BFR. A profitable company can therefore run short of cash if its BFR grows faster than its working capital, typically during growth, when receivables rise before collections. That is why French finance teams track BFR in days of revenue, not only in euros.
Working capital requirement formulas
- Operating current assets
- Inventory + trade receivables incl. VAT + other operating receivables (deductible VAT, supplier advances, prepaid expenses)
- Operating current liabilities
- Trade payables incl. VAT + tax and social liabilities (VAT due, wages, contributions) + customer advances
- Operating BFR
- BFR = operating current assets − operating current liabilities
- BFR in days of revenue
- BFR (days) = BFR ÷ annual revenue excl. VAT × 365
- Net working capital
- FRNG = long-term capital − fixed assets
- Net cash position
- Net cash = FRNG − BFR (= cash − short-term bank overdrafts)
- Standard (normative) BFR forecast
- Forecast BFR = (inventory days + customer days − supplier days − tax and social days) × forecast revenue excl. VAT ÷ 365
Receivables and payables are taken including VAT: that is the amount actually collected or paid, and the lag between VAT collected and VAT remitted weighs on cash. The reference revenue stays excluding VAT. The simulator applies this convention on a 365-day basis. It does not separate non-operating items (receivable on an asset disposal, corporate income tax payable, payables to fixed-asset suppliers): remove them before entering figures if you want a strictly operating BFR.
Calculate your BFR in 5 steps from the balance sheet
The calculation takes ten minutes if you start from the right lines. This is the order we follow on a balance sheet or interim statement.
- 1
Pick the right date
A year-end balance sheet is a snapshot, often a flattering one (low inventory, year-end chasing). If your business is seasonal, compute BFR on several monthly or quarterly statements and use an average balance, or the peak to size your financing.
- 2
List operating current assets
Inventory and work in progress (net), trade receivables incl. VAT (invoices to be issued included), other operating receivables: deductible VAT, VAT credit, advances paid to suppliers, prepaid expenses.
- 3
List operating current liabilities
Trade payables incl. VAT (invoices not yet received included), operating tax and social liabilities (VAT collected to remit, wages, Urssaf and pension contributions, taxes), advances received from customers, deferred income.
- 4
Compute BFR and convert it into days of revenue
Take the difference, divide by annual revenue excl. VAT and multiply by 365. The figure in days is the one you compare year on year and between companies: a BFR moving from 35 to 50 days signals drift, even if revenue grew.
- 5
Reconcile with net working capital
Compute FRNG (equity + loans over one year − net fixed assets) and deduce net cash. If it is negative, BFR is being funded by overdraft: either reduce BFR or strengthen stable resources (capital injection, term loan, retained earnings).
Worked example: an SME with €600,000 revenue excl. VAT
Take the simulator default values: a trading and services SME with €600,000 revenue excl. VAT (€720,000 incl. 20% VAT) that knows its net working capital of €120,000.
| Line | Calculation | Amount |
|---|---|---|
| Inventory | Balance sheet figure | €50,000 |
| Trade receivables incl. VAT | i.e. 120,000 ÷ 720,000 × 365 = 60.8 days of revenue incl. VAT | €120,000 |
| Operating current assets | 50,000 + 120,000 | €170,000 |
| Trade payables incl. VAT | Balance sheet figure | €80,000 |
| Tax and social liabilities | VAT, wages and contributions due | €20,000 |
| Operating current liabilities | 80,000 + 20,000 | €100,000 |
| Operating BFR | 170,000 − 100,000 | €70,000 |
| BFR in days of revenue excl. VAT | 70,000 ÷ 600,000 × 365 | 42.6 days (moderate BFR) |
| Net cash position | 120,000 − 70,000 | €50,000 |
Reading: the business ties up the equivalent of 42.6 days of revenue, funded by its working capital, leaving €50,000 of net cash. Two decisions change the picture. If it collects 15 days faster, receivables fall by 720,000 ÷ 365 × 15 = €29,589: BFR drops to €40,411, i.e. 24.6 days. Conversely, if revenue grows 20% with unchanged payment terms, BFR follows: 42.6 days of €720,000 revenue excl. VAT is about €84,000, meaning €14,000 of cash absorbed by growth.
How to read your BFR in days of revenue
The thresholds below are the ones the simulator uses for its diagnosis. They are management benchmarks, not standards: BFR is judged mainly against the business model and its year-on-year trend.
| BFR in days of revenue excl. VAT | Reading | Business models often concerned | Priority |
|---|---|---|---|
| Negative | The cycle generates cash: you collect before you pay | Cash retail, restaurants, subscriptions paid upfront | Do not fund long-term investments with it: it reverses if activity slows |
| 0 to 30 days | Light BFR, comfortable | B2C services, e-commerce without heavy stock | Watch the annual drift |
| 30 to 60 days | Moderate BFR, to finance and monitor | B2B services, trading, consulting | Customer chasing, supplier terms, cash plan |
| Over 60 days | Heavy BFR, cash strained as soon as activity grows | Manufacturing, construction, distribution with stock, public contracts | Suitable short-term financing and an action plan on payment terms |
The business models listed illustrate frequent patterns; they are not sector statistics. For a forecast, Bpifrance Création recommends using the payment terms observed in companies of the same activity and size.
Levers to reduce your BFR
- Invoice on the day of delivery or completion, and ask for a deposit on order for long projects: the fastest and cheapest lever.
- Set out in your terms of sale (CGV) the payment term, late-payment interest and the €40 fixed recovery fee, then chase on fixed dates (D−5, D+1, D+15) rather than ad hoc.
- Offer direct debit or online payment to recurring customers and review overdue balances by customer every month.
- Negotiate supplier terms within the legal cap (60 days from invoice date or 45 days end of month, article L441-10 of the French Commercial Code) rather than paying late, which exposes you to penalties and damages the relationship.
- Cut slow-moving stock: identify items with no turnover, reorder more often in smaller batches, use consignment where the sector allows.
- Quantify the extra BFR before any strong growth or large contract: a contract paid at 60 days consumes cash before it brings any in.
- Fund the remainder with the right tool: factoring (affacturage) or Dailly assignment for a large receivables book, an overdraft facility for swings, a seasonal credit line for a peak, stronger working capital for a structural need.
Mistakes that distort the BFR calculation
Mixing VAT-inclusive and VAT-exclusive figures
Entering receivables excluding VAT understates BFR by all the VAT still to collect; comparing receivables incl. VAT with revenue incl. VAT and then excl. VAT in the same analysis blurs the days. Simple rule: balances incl. VAT, reference revenue excl. VAT, and the same convention every year.
Relying on the year-end snapshot only
Many financial years close in a low season. A BFR of 20 days on 31 December can be 60 days in June. Size your financing on the peak, not on the balance sheet.
Including non-operating items
A receivable on a vehicle sale, a corporate income tax balance or a payable to a fixed-asset supplier are not part of the operating cycle. Including them inflates or understates BFR artificially.
Leaving doubtful debts in the balance
An invoice unpaid for a year is no longer a payment term, it is a loss risk. Isolate doubtful receivables, provide for them and start recovery; otherwise BFR looks structurally high when the problem is one-off.
Funding BFR with an unauthorised overdraft
BFR is a permanent need: funding it only with expensive, revocable overdraft weakens the business. The stable part of BFR belongs to working capital; only the variable part belongs to short-term financing.
Frequently asked questions about working capital requirement
What is the simple BFR formula?
BFR = inventory + trade receivables − trade payables. The full version adds other operating receivables and deducts tax and social liabilities. Example: €50,000 of inventory, €120,000 of receivables and €100,000 of operating payables give a BFR of €70,000.
What is the difference between BFR and net working capital?
BFR is a need created by the operating cycle; net working capital (FRNG) is the stable resource available to cover it, equal to long-term capital minus fixed assets. Net cash is the gap between them: with €120,000 of FRNG and €70,000 of BFR, net cash is €50,000.
Is a negative BFR good news?
Yes in the short term: customers pay before you pay suppliers, so the cycle generates cash. That is the case for large retailers or subscriptions paid upfront. But the resource reverses if revenue falls: do not use it to fund long-term investments.
How do you express BFR in days of revenue?
Divide BFR by annual revenue excl. VAT and multiply by 365. A BFR of €70,000 for €600,000 of revenue is 42.6 days: the business must finance about a month and a half of sales. The ratio lets you compare two years even if revenue changed.
What is a standard (normative) BFR?
It is a BFR built from average terms expressed in days of revenue (inventory, customers, suppliers, tax and social liabilities) then applied to forecast revenue. It is used in business plans: with 42.6 days and forecast revenue of €720,000 excl. VAT, the expected BFR is about €84,000.
Why does my BFR rise when revenue grows?
Because inventory and receivables grow with sales at unchanged terms. A 20% revenue increase raises BFR by about 20%. If BFR grows faster than revenue, the signal is different: longer customer terms, stock piling up or suppliers paid earlier.
How do you finance BFR?
The stable part is funded with durable resources: equity, retained earnings, medium-term loans. The variable part is funded short term: overdraft facility, authorised overdraft, seasonal credit, Dailly assignment of receivables or factoring, whose cost should be compared with the cash gained.
What payment terms does French law impose between businesses?
Without agreement, the term is 30 days after receipt of goods or completion of the service. By contract it cannot exceed 60 days from invoice date, or 45 days end of month if expressly stipulated (article L441-10 of the Commercial Code, from the LME law). Specific terms apply, for example 30 days in transport.
Should BFR be calculated including or excluding VAT?
Receivables and payables are taken including VAT, since that is what is actually collected or paid; the revenue used to convert into days stays excluding VAT. For an SME charging 20% VAT, forgetting VAT on €100,000 of receivables understates BFR by €20,000.
Sources and references
Reading your BFR
The working capital requirement (BFR) is the cash your operating cycle freezes between the moment you pay your suppliers and the moment your customers pay you. It is the difference between operating current assets (inventory + receivables) and operating current liabilities (trade, tax and social payables). A positive BFR has to be financed; a negative BFR is a source of cash.
The figures that drive your BFR
- BFR = (inventory + receivables + other receivables) − (trade + tax & social payables)
- BFR in days of revenue = BFR / revenue × 365
- Net cash position = net working capital (FRNG) − BFR
- The main lever: shorten your DSO and your inventory rotation
- Below 30 days of revenue, the BFR is generally comfortable
Why run this simulator?
A precise BFR projection lets you:
- Anticipate the cash gap before growth or a seasonal peak strains it.
- Decide whether to negotiate supplier terms, factor receivables or fund the BFR.
- Convert the BFR into days of revenue to compare it against your sector.
- Build the bridge to your net cash position and your financing plan.
A chartered accountant to pilot your cash
Hayot Expertise sets up the cash-flow dashboards (BFR, 13-week plan, DSO/DPO) that keep growing companies in control. We turn the figures into an action plan, not a report.