Entrepreneurs who operate season businesses must know how to manage the effects of seasonality surplus and deficit of working capital. Just like stock market, when business sale occurs during a particular time (of the year), the working capital fluctuates drastically. To ensure a balance in the business firm and have adequate liquidity to run all the operations effectively, it is important to have enough working capital have rather not overspend during lower sale period of the year.
In this blog, we will be looking at various reasons on why and how can working capital to help your business grow.
1. Seasonality in Business:
Business can be really be headache sometimes and it becomes important to have patience in phases in the business. Many people quit the business because they become impatient and thus lose the best part of the cake. During the down sales, you may need capital to gear up for a busy season or to keep the firm operating even when there’s less money coming in.
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A good amount of working capital might help your business to get through the down-sale phase without causing any trouble or any sort of imbalance in operations of the business and help them grow uninterruptedly.
2. Extra Funds:
Almost all business firms will come through a phase once or many times when they’ll need additional funds to meet the obligation of the suppliers, employees, and sometimes the government while waiting to receive money from customers. But everyone can’t wait to receive the money can they? It becomes crucial to have working capital to execute the plans seamlessly and pay all the suppliers, government, and the employees to meet their demands.
3. To make clever moves:
Working capital can help you improve your business in many ways. For instance, you can the discount advantage from the suppliers and can buy the raw items from them in bulk. This will enable you to increase the difference between selling costs and manufacturing costs, thereby increasing the profit percentage of the goods and services you are offering to the customers.
4. Managing Expenses:
Sometimes it becomes more expensive to run the firm that the usual days. You might have had other project related works which would require extra funds. These projects may usher your business to flow in the desired direction. Or let’s say you have hired extra and temporary employees to work on certain days to meet the demand of the market during the peak time. This isn’t rare in business firms today. And you can also use this working capital to pay these temporary employees who have worked for you to help your business excel.
5. The Reputation of your Company:
Having working capital will ensure that you’ll be able to continue to operate in the market without any sort of interruption. You can pay for supplies, raw materials, meet payroll, which are nonnegotiable operating expenses that you would have to meet on time. Having sufficient working capital will maintain the reputation and goodwill of the company.
For more information about Working Capital you can follow the pioneers like Brian Paes Braga and others. Canada based entrepreneur Brian Paes-Braga serves as a Partner and Managing Director at Fiore Group, a leading merchant bank which builds, invests, finances and advises firms in the natural resource, technology, food and beverage and entertainment sectors.