What Working Capital Is Tied Up In
- Stock
- Medicines, consumables and food sitting on shelves. Bought and paid for before it earns anything.
- Debtors
- In small animal practice mostly direct insurance claims. In farm and equine practice, client accounts on long terms.
- Work in progress
- Treatment delivered and not yet invoiced, particularly around longer procedures and hospitalisation.
- Less creditors
- Wholesaler credit funds part of the cycle. Extending it beyond agreed terms is expensive borrowing dressed up as convenience.
How to Calculate Yours
Take stock plus debtors plus work in progress, less trade creditors. That is your current working capital requirement. Express it as a number of days of turnover so you can track it over time and compare it to the same practice a year ago.
Then look at the trend rather than the level. Working capital rising faster than turnover means cash is being absorbed, and the cause is usually stock or debtors.
What to Hold in Reserve
Separately from working capital, most practices should hold a cash reserve covering the predictable large payments: corporation tax or the partners tax reserves, VAT quarters, insurance renewals and any planned equipment expenditure.
Practices that keep tax money in a separate account almost never have a January problem. Practices that do not, frequently do.
The Two Changes That Catch Practices Out
Moving from client-pays to direct insurance claims improves the client experience and pushes a large slice of income several weeks into the future. That transition needs funding and it is often made without any funding plan at all.
Launching a pet health plan does the opposite: cash arrives ahead of the treatment it buys, which flatters the bank balance while building a real commitment. Practices that spend plan cash as it lands are borrowing from their own clients.
Written by Veterinary Accountants UK editorial team. Published 3 August 2026.
Last reviewed 3 August 2026. [REVIEWER DETAILS REQUIRED BEFORE PUBLICATION]