Months of working capital is a useful metric that shows how long an organization can survive at its current expense size in the absence of revenue. When organizations have sufficient working capital, they can responsibly manage and take risks, such as covering short-term obligations to others, better navigate unpredictable shortfalls in revenue, or manage needed facility maintenance, technology, and equipment. Healthy working capital gives arts leaders breathing room when faced with uncertainty or the prospect of loss and allows organizations to reflect on, and reconsider, the best path forward.
Using data collected from over 1,000 arts and cultural organizations, the report reveals that average levels of working capital increased to 5 months, or the equivalent of 41.7% of annual expenses, starting in 2017 and remained fairly stable through 2019. It is important to note that median working capital -- or the midpoint in the range of organizations -- was only 1.5 months, showing skew to large organizations. Most cultural groups had inadequate working capital pre-COVID.