Many start-up businesses stop at determining their beginning Equity. After putting up the initial capital for your business, you have to determine the optimum Working Capital to position your business on the road to profitability and growth.
Specially during these times of high transportation costs and constricted markets, f you do not put up enough money for Working Capital, you will be forced to incur debt or inordinately prolong accounts payable so that you get into trouble with your suppliers. Not having adequate Working Capital will place your business in an unsustainable cycle of debt.
After you have determined the …read more

A business wimp (whether small business or large corporation) is a venture with inadequate Working Capital.
A business wimp will be forced to incur debt or inordinately prolong accounts payable so that it gets into trouble with suppliers. Not having adequate Working Capital will place the business in an unsustainable cycle of debt.
The business wimp has to borrow to finance Cost of Goods Sold and Operating Expenses. The interest expense will bloat Operating Expenses. There will have to be more borrowing to be able to pay suppliers (Cost of Goods Sold), pay salaries (Operating Expenses), and interest. …read more

AccountingSolver received an insightful comment from Mary Schaeffer, Author Controller & CFO’s Guide to Accounts Payable (John Wiley & Sons 2007) & 12 other business books, Editorial Director Accounts Payable Now & Tomorrow (http://ap-now.com/blog/):
“I just read a post on another blog recommending payment stretching as a way of improving cash flow. And, to be honest, it will do just that – at least temporarily.
But the pundits that recommend this tactic overlook a few things. First, it will annoy the you know what out of your suppliers. They have no interest in becoming your banker – they are worried enough about …read more

One of the most effective ways of stimulating sales is by injecting a credit program into your sales program (i.e., set up an accounts receivable).  If / when your credit program / accounts receivable results in a growth in Revenues as expected, your Cost of Goods will also grow in step with your Revenues.
In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.  One of the most effective ways of reducing the need for Working Capital is through suppliers’ credit or your accounts payable.  It would be a great advantage …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell or the services you render (i.e., your Cost of Goods Sold or Cost of Sales) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses). In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.
What you want to do with your Cost of Goods is to turn it into cash as fast as you can (i.e., sales). One way of stimulating sales is to extend …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell or the services you render (i.e., your Cost of Goods Sold or Cost of Sales) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses). In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.
If you are not able to sell your products (i.e., they remain in inventory), you put pressure on your Working Capital. You will need more cash (i.e., Working Capital) to pay …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell or the services you render (i.e., your Cost of Goods Sold or Cost of Sales) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses). In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.
One of the most effective ways of reducing the need for Working Capital is through suppliers’ credit or your accounts payable. It would be a great advantage if you were able …read more