Monday 16 September 2019

Working Capital Helping To Meet Daily Payment Obligations Of Business Organizations

Working capital, which is the difference between the assets and liabilities of a company, is essential to meet the short term expenses of the company. These expenses include operating expenses, inventory purchases, repayment of short term debts, and the like.

Working capital ensures that the company is able to meet all its payment and financial obligations during the short term period. It is the presence of working capital that determines the financial health of the company.



Negative working capital is not a good prognosis but neither is excessive working capital.  This implies that there is improper financial management in the company and it is not making good use of its assets to generate an income.  When the working capital corpus becomes low or negative, then they look out for companies such as Mantis Funding in West Palm Beach for a quick injection of cash into the business.

Importance Of Skillful Management Of Working Capital

The amount of working capital required by a company changes from time to time and is dependent on the demand and supply cycle. During periods of great demand, they may require additional working capital to increase their inventory or raw materials to supply orders on time. If the company has started a project and payment will be obtained only upon its completion, sufficient working capital is required to keep the company going during the project and until the payment is received.

During low demand periods, they still have expenses and payment obligations that have to be met. Therefore, skillful management of your working capital is essential for the survival of your company. It is also a tightrope walk for most managers.

The perfect working capital ratio is between 1:2 and 2 as anything less than 1 would imply a negative situation and anything over 2 would imply that there is too money in the hands of debtors and in inventory. In the case of a negative scenario, cash advances are taken from companies such as Mantis Funding.

Tips To Increase Working Capital

There are different methods by which companies can increase their working capital. They can shorten the working capital cycle and convert current assets and also liabilities into cash. This can be done by accepting credit cards and making payment easier for their clients, specifying exact payment days to buyers, rewarding or penalizing clients as per their payment patterns.

Clients can also be asked for an upfront deposit by using business software.  This will also reduce the chances of nonpayment. Crowdfunding and invoice financing are also other methods of getting short term business funding. If however, a business owner has no line of credit, then approaching business finance lenders such as Mantis Funding in West Palm Beach is also an option.

Getting Out Of Tight Corners With Merchant Cash Advances

Every business organization suffers from cash flow problems at some point or the other. Cash advances from finance lenders such as Mantis Funding help them to get out of tight situations.  Merchant cash advances are usually for a short period of time and the cost-term is decided at the time that the money is advanced. The advantage here is that there is no need for collateral and no checking of credit scores.

The money is advanced against future sales of the company. The agreed-upon percentage is deducted during every sales transaction until the contracted amount is covered. Documentation and paperwork are minimal. Once the offer is made and accepted, the cash transfer takes place very quickly. This quick transfer is especially important for businesses that need a prompt injection of cash to meet urgent needs speedily.