Film Accounting Glossary
Working capital
What is working capital?
Working capital is the cash a company needs on hand to operate between paying its costs and collecting its revenue.
For a picture-car or equipment vendor it is what funds fleet maintenance, insurance, and staff while productions pay on thirty to sixty day terms. Vendors fail on working capital far more often than on profitability, which is why prompt payment matters more to them than the headline rate.
Example
A picture-car vendor with $400,000 of annual profit can still fail if $320,000 of invoices sit unpaid at 60 days while fleet maintenance, insurance, and wages come due monthly. Prompt payment is worth more to that vendor than a higher rate.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
The vendor's side of the relationship. Worth understanding when negotiating terms, because terms are often more negotiable than rates.
Common mistake
Negotiating only on rate with a vendor. For most suppliers, payment terms are worth more than price, and they are often the more negotiable of the two.
Related questions
- Why does working capital matter to a film vendor?
- Because fleet maintenance, insurance, and wages fall due monthly while production invoices are paid in 30 to 60 days, and that gap has to be funded.
- Can a profitable rental company still fail?
- Yes. Vendors fail on working capital far more often than on profitability, which is why prompt payment is genuinely valuable to them.