One reason your business is cash poor could be that you're not managing the elements of working capital. Listen to find out more.. To listen to the episode hit the play button. To
One reason your business is cash poor could be that you’re not managing the elements of working capital. Listen to find out more..
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In this episode we will talk about the concept of working capital. We’ll help you understand what makes up working capital and why you need to pay attention to it. We’ll also give you tips on how to manage it better so that you are maintaining healthy levels for your business.
*Working capital is a key element of liquidity that businesses need to fund operations and maintain momentum as it grows.
*Working Capital is current assets less current liabilities. An asset or liability is current if is due within one year.
*Failing to watch and manage working capital can lead to potential problems of not paying its bills or meeting its obligations.
*While growing businesses are increasing sales, they are usually increasing spending which increases the pressure on working capital to stay ahead.
*Being profitable doesn’t necessarily mean that your business is free from potential working capital issues.
*We look at who in the company needs to be responsible to watch working capital.
*Lisa discusses the key positions in most businesses that have a role in impacting the elements of working capital.
*Entrepreneurs can help educate their team on working capital and how their decisions impact the company and its liquidity.
*Lisa gets into particular tips in managing and improving working capital on both the asset and liability side of the equation.
*One way to measure how you are doing in this area is to compute the working capital ratio. Lisa describes how to calculate it and use it to monitor your business.
Resources and Links
Note: Links in this post may be affiliate links. Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.
If you would like to contact Lisa for advice about working capital in your own business follow this link to request a Quick Care session.
To learn more about managing one of the elements of working capital be sure to check out this episode on Cash Flow Forecasting.
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Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track. You can find out more about her here