How Does Operating Working Capital Affect Your Business
Just as production and efficiency immediately affects your business profits, operating working capital quickly affects your business success. Learn how to fine-tune your cash flow forecasting and operating working capital levels. This will help you avoid business cash emergencies.
Why is Operating Working Capital So Important?
Operating working capital is simply how much cash you have available to run your business. It is a very big deal.
If you are like many small businesses, you have a good business but struggle often with making payroll, paying important expenses or satisfying new/existing clients. When your operating working capital is low, you have no cash to handle these issues. This leads to stress and steals your focus.
How Can You Get More Operating Working Capital
Certainly, earning more profits will help you obtain more operating working capital. As any small business owner knows, this is easier said than done.
Some companies elect to replace short term debt responsibilities to free up more cash. However, this binds you to lending companies for many years.
Perhaps the simplest way to improve your operating working capital is with a business line of credit. This allows you to bridge gaps in cash flow without the need to take funds from other areas of your business.
A good accountant can often help you figure all this out and often what they see as a potential solution is a line of credit to help you even out cash flow. A line of credit is specifically designed to help you during those stressful times when you are low on cash. Business lines of credit can help improve your operating working capital.
Reasons Why Your Operating Working Capital Might be Low
Every business owner at some point has lower operating working capital than they were expecting. The reasons for this typically fall under three categories.
Your clients are not paying you fast enough. Therefore you have all these expenses that you are paying immediately to maintain your credit score and reputation. However, you don’t receive money from your clients for 45, 60, or 90 days.
You are not charging enough. As a result, you do not have a buffer to cover your costs plus the extra profit to carry you over while waiting for your clients to pay you.
Whatever inventory planning strategy you use needs work. To fulfill orders quickly, you often need to increase inventory. But of course, that takes cash. It’s vital to create a strategic approach for how much inventory you keep on hand and moving it out faster.
The Benefits of a Line of Credit from Financing Solutions
The value of a line of credit from Financing Solutions (www.financingsolutionsnow.com) is that it doesn’t cost anything to set up. It costs nothing until you use it.
When you do use it, it is inexpensive. Additionally, you can pay it off whenever you like. This makes it a great backup plan to have.
A Financing Solutions line of credit is also easy to get in place. You only need to do at least $300,000 in revenue per year. The online application takes two minutes to fill out.
You will then get a written quote to consider, telling how much small business funding you are eligible for. Then all you need to do is send in a few documents like bank statements, a recent tax return and a few other items that you likely have at your fingertips.
With small business funding from Financing Solutions, you can make your business stronger and increase your operating working capital. Every business owner should have a line of credit, just in case.