Why is Working Capital Important for Business Success?

Why is Working Capital Important for Business Success? | OpenGrowth

It is no secret that the financial health of a business is a great determinant of its overall success. Oftentimes when we talk of the financial health of a business; the focal point is always the profits made. But do merely profits suffice in the growth of a business? Profits surely have a significant impact but they are not the most important component of the financial establishment.

What do you do when despite being in profit you cannot carry out your usual operational tasks? Such a scenario could occur when you deliver your services and are expecting a profitable amount but the payments are not being made in time. This is where working capital comes to the forefront. 

What exactly is working capital? Working capital is the capital available at hand which helps you run your day-to-day business practices. It is often referred to as the difference between a company's current assets and current liabilities. Current assets incorporate all the cash, inventory, and accounts receivable which can be liquidated to cash within a term of one year and current liabilities consist of the bills and loan payments you must make in a year. This implies to calculate working capital; one needs to find the difference between current assets and current liabilities; the result of which must be positive. A negative result indicates you have a deficient working capital and might run out of cash sometime soon. 

 

why is working capital important for business success

 

At such times; it is very likely you will be alarmed and anxious about what can be done. Fret not; there are several firms offering working capital loans, which will keep your business running. These are often lent out for a short duration with low premiums. One issue, however, is that the process of approval and dispersal of loans is very time-consuming and complicated. Although there are certain firms that understand your needs and offer easy processing, which lets you avail of the business loan smoothly. 

But why is working capital really important for a business to succeed? Read on to know! 

 

Managing downtime 

Downtimes are experienced by every organization once in a while.  If you run a business that is seasonal in nature especially; you are inevitably going to face significant fluctuations in your business. At times of high demand, there is a great probability that you will have to hire extra workers, increase your inventory and so on. Having an estimate of your working capital will allow you to be prepared in advance and help you carry out the seasonal operations effortlessly. Even if you are not a seasonal business; you could face downtime and having a strong working capital will surely help. 

 

Being prepared for emergencies

Emergencies never announce their arrival. You can never guess when an emergency will strike. These could be in the form of sudden client withdrawal, damage by a natural disaster, lawsuit case and so on. Such circumstances can significantly impact the budget of your business. With a good amount of working capital, you will be able to tackle unexpected costs with ease and it might also help in risk tolerance

 

Fulfilling short-term obligations

There are several short-term obligations you need to fulfil. These could be in the form of debts, purchasing inventory, worker salaries, equipment purchases and so on. All these obligations and liabilities can be easily fulfilled with strong working capital.

 

Why is working capital important for business success

 

Attracting investors or obtaining credit

When you are trying to seek the help of a creditor or are trying to attract and impress an investor; they will analyze and research your business. If they come across an insufficient amount of working capital; they might take it as a red flag and withdraw themselves from the deal. 

 

Growth and expansion

Everyone wants to get their business to the next level. You too might be wanting to expand and get your business to great heights. With strong working capital, you are well-equipped. It will allow you to take instant decisions and actions and will help you source everything you need to thrive. If your business has a negative cash flow, however; you might be restricted to pursue what you want and it will be a significant hindrance in your way to growth. 

 

Peace of mind 

Having low funds at hand will keep you apprehensive most of the time. You will constantly be ‘on-the-edge’ wondering what if something goes wrong and causes extensive financial damage? Having enough working capital will keep you at peace that you are covered at all times and can face any difficulty that comes your way. 

Profits surely are an important aspect of your business’s financial state, but what truly guards your business against challenges and is the key tool to keep your business afloat is the working capital. Therefore, make sure you put in greater effort to maintain records of it and have adequate working capital in your possession. 

 

We at OpenGrowth, are committed to keeping you updated with the best content on the latest trendy topics from any major field. Also, both your feedback and suggestions are valuable to us. Do share them in the comment section below.

A staunch proponent of karma, Mallika believes in what goes around, comes around philosophy. She is ecstatic with her life and strives to live it to the fullest.

Comments

Blank User| OpenGrowth

desmondwilson457@gmail.com

13th Dec'23 07:51:57 PM

ALL YOU NEED TO KNOW ABOUT LOST FUNDS RECOVERY

Blank User| OpenGrowth

desmondwilson457@gmail.com

13th Dec'23 07:37:17 PM

ALL YOU NEED TO KNOW ABOUT LOST FUNDS RECOVERY

Blank User| OpenGrowth

monikaschultz217@gmail.com

28th Nov'23 02:28:54 AM

My name is MONIKA, here's my recommendation................ I have been in search of a good hacker for over 2 years, Recently I was looking through some websites; then I got Cyberwizzard, he was highly recommended on the website so i decided to try him out, he was able to carry out all the task i gave him within 24 hours, He also helps with: Binary Recovery, Files Recovery, Crypto investment, Password, Bypass / Recovery Malware Removal / Criminal Record Expunge, Blank ATM Card, Social Media Hack, Remote Mobile Monitoring & Hacking, Credit Repair and Private Key Reset. he is very good and reliable you can reach out to him if you are in need of the service of a good hacker WhasAp him on +39 351 089 6670 email him on cyberwizzard@seznam.com

Blank User| OpenGrowth

rachealttiafhd@gmail.com

16th Sep'23 09:30:43 AM

If you want to invest and earn profit in crypto, do not hesitate to visit primecryptomarket.com , i was first introduced to this platform by a colleague, since then i have made 309,650 USD. so i strongly recommend it to anyone.

Blank User| OpenGrowth

ericjack427@gmail.com

20th Aug'23 03:07:13 PM

Hello, my name is Eric, when I lost a substantial amount of Bitcoin, I felt devastated and didn't know where to turn. That's when I discovered Francisco Hacker and their exceptional Bitcoin recovery services. Francisco's expertise, dedication, and unwavering commitment were instrumental in helping me reclaim my lost funds. They skillfully navigated the complex world of cryptocurrency and provided invaluable guidance throughout the recovery process. I am incredibly grateful for Francisco's professionalism and the personalized support they offered during this challenging time. I highly recommend Francisco Hacker to anyone in need of reliable Bitcoin recovery assistance. Email: Franciscohack(@)qualityservice.com Telegram @Franciscohacker

Blank User| OpenGrowth

crystalhaynes209@gmail.com

23rd Jul'23 05:58:46 AM

I have never had a STD before and had never had unprotected sex. However, I had a boyfriend, who at that time had a cold sore. Frankly, we assumed that it was just a spot because we never came to know about herpes until now. We engaged in oral sex, and that’s how I got herpes. Thank God that I found Dr. Akhigbe online who prepared me a herbal remedy that I only took for 14 days with faith, then I went for a check up and I was totally cured(herpes Negative). His medication has no SIDE EFFECT, there is no special diet when taking drugs you can contact him on his email: drakhigbeherbalhome5gmail.com or whatsApp +2349021374574. and get all your problems solved.

Blank User| OpenGrowth

janewhite11911@gmail.com

18th Jul'23 11:11:32 AM

I’m very excited to speak about Elite Wizard Bitcoin Recovery, this cyber security company was able to assist me in recovering my stolen digital funds and cryptocurrency. I’m truly amazed by their excellent service and professional work. I never thought I could get back my funds until I approached them with my problems and provided all the necessary information. It took them 72 hours to recover my funds and I was amazed. Without any doubt, I highly recommend Elite Wizard Bitcoin Recovery for all your cryptocurrency recovery, digital funds recovery, hacking, and cybersecurity-related issues. Email: eliterecovery247@cyber-wizard.com Phone: +1 (740) 688-0116

Blank User| OpenGrowth

muchebenjamin2023@gmail.com

13th Jul'23 04:55:38 AM

Indeed Santoshi Hackers have proven their trust on online hackers so I'm delighted to talk about Santoshi Hacker given that this cyber security organization made me get back my stolen cryptocurrency and digital currency. Their outstanding service and competent work absolutely astound me. I stood little hope of recovering my money until I called Santoshi Hacker with my issues and all the relevant details. I was stunned that it took them 24 working hours to reclaim my money. Without hesitation, Santoshi Hacker is the best solution for all of your cybersecurity- and cryptocurrency-related problems. For enquiries, Email and get your stolen funds back: https://santoshihacker3.wixsite.com/santoshihacker santoshihacker@hotmail.com scared no more of your loss.