The Importance Of Working Capital In Business Management

1. The Importance Of Working Capital In Business Management

2. Working capital is not really a term that features in your daily business interactions. That said, it is essentially the backbone for a successful business venture. And that’s especially true for small and micro-businesses. The availability or non-availability of sufficient working capital is integral to the overall financial health of an organization.

3. From paying rent, employee salaries to making payments to vendors for products or even thinking of a business expansion, working capital is what you need to take your business further or to even meet your current business obligations.

4. Calculating the current levels of working capital as well as preparing a plan for future needs is the first step to ensure that you understand the overall needs of your business. The next step is to consider ways to obtain immediate cash to create sufficient working capital. This is exactly where capital funding institutions like Cresthill Capital feature within the process.

5. However, let’s first start with a brief on the basic calculations involved in estimating working capital as well as the needs that may call for additional working capital.

6. Calculating Working Capital

7. Working capital is calculated as the difference between the short term assets and the short term liabilities. For such calculations, the present assets like the cash available in a business account as well as those due to be shortly received are calculated.

8. Similarly, liabilities include the money that’s payable to vendors, creditors as well as that required for operational activities of the company. Net-working capital is hence an indication of the cash flow available within the business to meet current as well as short term expenses.

9. Often, a crunch in working capital happens during the operations of a small business. This is when capital funding companies like Cresthill Capital come to the rescue of merchants.

10. Business Needs That Call For Additional Working Capital

11. Understanding the availability of working capital helps small business owners to plan their monthly cash inflows and outflows which can further help in identification of the more cash requiring months in advance.

12. Businesses might often need sudden and extra working capital owing to reasons like expansion plans, bulk purchasing requirements at times of discounts, to pay temporary employees or simply to gear up for a busy customer season. Similarly, sudden additional working capital may be needed to fund business obligations like increased wages, rent, etc.

13. Leading funding companies like Cresthill Capital reviews the overall sales record of the small business venture and provide quick cash that works as working capital to the tide of the rough patches.

14. Options For Augmenting Your Working Capital

15. Banks are not the preferred options for boosting working capital. In most cases, they do not find extremely small cash advance lucrative. Other options include using business credit cards. These again have their limitations of higher cost structure rates which add to liabilities. In such instances, taking merchant cash advance from leading capital funding companies like Cresthill Capital are the most feasible and convenient options.

16. While banks depend on confirming the borrower’s years of experience in the business as well as their overall business plans, capital funding companies like Cresthill Capital reviews the monthly credit/sales record and prepare their repayment plans accordingly. Cash advances are quick to obtain with flexible repayments which make it super convenient for borrowers to manage.