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Working capital: what it is and what it is for

Do you know what working capital is and how important it is to the financial health of your business? Regardless of the size or segment of your company, the lack of working capital may be responsible for the bankruptcy of your business. Continue reading this article to better understand.

What is working capital?

Working capital is a kind of reserve made for a company or institution to exist and carry out its activities in a healthy way. It consists of resources such as money and credit, necessary to afford the liquidity of the company. Working Capital are the short-term investment decisions of an entity in its operating cycle, formed basically by cash, accounts receivable and inventories.

Why is it important to maintain good working capital?

Working capital involves all financial steps of your business, from the payment of suppliers to the receipt and profit of sales made, so maintaining a good reserve in cash, makes the company able to pay its expenses and sustain its operation.

The value of capital is related to several factors, different for each organization. Thus, the assistance of an accounting office that understands your needs is indispensable.

The absence of working capital

When a company decides not to maintain good working capital, it may need to make difficult decisions in the future, such as cutting expenses, cancelling employees, and potential investments.

How to improve your company’s working capital?

To strengthen the working capital of your business, it is necessary to develop a planning that identifies and recognizes all the costs of the organization.

Plan

It is very common for entrepreneurs and entrepreneurs to open businesswithout prior planning, not knowing the basics of the segment in which they want to act. Thus, important issues involving business management go unnoticed and factors such as costs, investments and operating flow are without proper support, impairing the success of the business.

Therefore, before opening a business or starting a new operation, set goals, objectives and make sure you have a safe working capital.

Eliminate unnecessary spending

Find expenses that can be reduced or eliminated from your company, without it suffering great losses or quality fall in the products offered. With this analysis, you manage to get enough money on your business cash for a secure working capital.

Maintain discipline

Avoid spending your company’s booking paying other expenses. There’s no point in having good working capital in the beginning, and ending up getting lost on the way. Stay discipline!

Have a good billing system

Delinquent customers can be very damaging to your company and the more debtors, the more working capital is needed. Therefore, have a financial sector responsible for the collections of your company, in order to prevent it from going into the red.

Manage inventory

Having efficient inventory management maintains the financial health of your company, since with a good analysis of your company’s sales, you can establish the exact amount of goods that need to be purchased and even know when it is necessary to carry out promotions and settlements so that the stock does not stand still.

Conmax Enterprise Solutions helps you boost your company’s financial results.

Based in São Paulo and Fortaleza, but working directly in several states of the country, we are sure to be adding value to new customers, helping them through corporate accounting to further develop their business. We have a team composed of more than 25 professionals of higher education, continuously trained and specialized in various areas of activity.

Be more of a company positively impacted by our service. Our service channels are ready to serve you.

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