The significance of working capital is known to every businessman. Companies that do not have sufficient working capital are in jeopardy.
Working capital must be sufficient enough to cover the maturing short-term debts and upcoming operational costs. The working capital ratio below 1.0 indicates that the company has some trouble meeting its short-term commitments.
But that doesn’t mean a higher working capital ratio is good for the company. Higher working capital indicates excess inventory, meaning the assets are not utilized well. The maximum working capital ratio must be between 1.2 and 2.0.
Every business needs to manage their working capital efficiently. That is where we come into the picture. Our expert team balances your working capital in the radius of the recommended limits.
Reasons why you need to manage your working capital
- To keep your business away from danger
Every business must have sufficient working capital to carry out its operational costs. Apart from the operational costs, the short-term debts that are up for maturity need to be covered as well. If not, the business may face some legal problems.
- To utilize your assets well
Not optimizing your assets well can also bring your business to a standstill. Managing your working capital well means utilizing the assets in the most optimum way. For example, you should not have a huge amount of inventory as it blocks your working capital for a long time.
- For the smooth functioning of your business
Proper management of working capital keeps the wheels of the business moving forward. You need to manage your working capital to avoid any interruptions in the operations of the business. That is why you need an expert to help you manage your working capital in the best possible way.
- To boost your profits
Correct use of working capital will result in an increase in your earnings. If you need to earn more out of the same range of working capital, you need experts to manage it well. No stone should be left unturned when it comes to increasing your profits.
- To improve your goodwill
A satisfactory working capital ratio will project a positive image of your company. Timely payments to your creditors will add up to your goodwill. Thus, to improve your goodwill, you need to have an expert on board to manage your working capital.
When do you need working capital management?
You need to keep a check on your working capital as it is the fuel that keeps your business running smoothly. It is the main factor that drives your operational activities. You need to make sure your soon maturing short-term debts are covered. If they are not, you might end up in some legal formalities.
Here are some indicators that tell you to improve your working capital management:
- The working capital ratio is below 1.0
- You are not getting the expected returns
- Your inventory is more than the usual limits
- You need to improve your goodwill
- You are experiencing interruptions in daily operations
- You are unable to meet your short-term debts
Why choose us?
CFO Services is based in Mumbai, having served in various metropolitan cities like Bangalore, Delhi, Kolkata, Chennai and many more. Our team of experts has the exact knowledge and experience you would require. We provide you with the expertise allowing you to focus on your business activities as we work on the non-core activities that cannot be neglected. Businessmen often ignore the importance working capital holds in a business and thus fail in proper management.
Our experts are here to manage your working capital in the most optimal way.
If you’re looking for a better working capital management, your search is now over.
Fill out the form right away and contact us to get started.