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To calculate a company’s working capital, subtract the company’s total liabilities (such as money owed to third parties) from the total assets of the business (such as payments from clients). The resulting figure will illustrate the financial resources the business has available to cover operational costs and promote future growth. If you’re an entrepreneur, here are a few reasons why it’s critical to routinely monitor your working capital and how a collection agency can help boost it.

Why Is Working Capital Important?

If your company has more financial liabilities than assets, this is considered negative working capital. If you don’t have enough cash available to cover resources, your business may have trouble supporting sustainable growth. The worse the working capital gets, the more challenging it may become to pay creditors, purchase inventory, and cover employee salaries.

debt collectionBut if your business has positive working capital, it will be able to cover those current expenses as well as fund future growth. For example, the greater the working capital, the easier it will be for your company to hire new staff, invest in additional real estate, or fund market research.

Lenders and investors may also look at working capital as a way to assess your company’s prospective financial health. Specifically, positive working capital indicates a higher promise of success, which in turn, may make it easier for you to secure loans or investments. Negative figures, however, could suggest your business is a financial risk that isn’t worth taking on.

How to Boost Working Capital

To increase your working capital and your company’s potential for success, you’ll want to look at ways to bring in more cash and spend less. Apart from securing more customers, you can boost your revenue stream by creating tighter guidelines for accounts receivable procedures. These efforts will improve the speed at which clients pay your business and reduce the likelihood of having to use a collection agency to secure past-due balances.

You can also improve working capital by looking for ways to cut expenses. For example, you might purchase inventory in bulk to benefit from lower rates. You might also hire a third-party accounts receivable management firm to reduce the overhead you spend on in-house accounting.

 

Whether you’re launching a new brand or ready to grow a corporation, Joseph, Mann & Creed offers reliable solutions that can help improve your company’s working capital. Based in Twinsburg, OH, this national and international B2B collection agency utilizes proven strategies to recoup unpaid balances from clients to keep your revenue growing. They also offer full-service accounts receivable management services to simplify the way clients pay you and prevent the need for debt collection. For more details on these capabilities, visit this firm online or on LinkedIn. Call (216) 831-5626 to speak about your company’s needs today.

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