Access or not access working capital for entrepreneurs? All people who venture to face every bureaucracy of setting up their own business in Brazil know full well how difficult and time-consuming this process can be. Not enough, the financial management of any business is a subject that causes a lot of concern to managers and entrepreneurs, given their importance and complexity.
Efficient management of all your resources is not always a simple process, but with the right planning and dedication this difficulty can be largely overcome. But for this, it is not just the management tools that we should focus our attention on.
With that in mind, we prepared today’s post to address more in-depth so-called working capital for companies. So, continue your reading and find out once and for all what it is, how important it is within your organization, and how that resource can be used. Look!
What is working capital for entrepreneurs ?
Working capital is nothing more than any financial resource reserved to fund the vital operations of the company. Therefore, this credit is responsible for helping the entrepreneur in their sales in the long term, in the maintenance of the stock of products, in the payment of suppliers or even to acquire raw material.
In addition, you can use it to pay for operating expenses – either by paying taxes to the government or by paying employees’ payroll. In this sense, the offers of this line of credit made by financial institutions are a great help for your company’s cashier.
How important is it to have credit in your company ?
In general, you need to keep a reserve for cash flow and working capital in your organization so that these resources are always available. Doing so, the financial health of your business will always be up to date, after all, operating costs are diverse and these debts are always present in the business routine.
In addition, it is important to consider that several credit providers and banks have this line of credit to assist you promptly if you have not made your reservation in advance.
Therefore, it is essential to be aware of all the conditions that are offered for this type of financing and thus ensure the success of your business.
When can it be used in your business?
As discussed earlier, working capital for entrepreneurs is used in all bank transactions essential to the operation of the company and this encompasses all the available values - whether in cash or deposited in the bank – to buy, sell, negotiate and produce the products and / or services that the company offers to its clients.
In this sense, it is important to point out that the success of a business goes directly through the management skill of the manager in maintaining a financial balance of all company accounts.
Thus, all incoming and outgoing values need to be kept in full control to reduce the chances of failures and thus to foster production capacity always at an acceptable level.
How to correctly calculate the value of working capital ?
To make this account, you need to be in possession of some important information, as well as the sales figures, purchases, costs and deadlines. In addition, it is fundamental to know the concept of the items that compose this calculation. See below:
Net working capital
Net working capital is all the amount available in cash by the company to be used in operations so as to keep the business in full operation. So, this item differs from working capital basically because you have to consider the assets and liabilities of your business.
This asset sets the entire amount available in cash, including short-term receivables, that is, within a period of up to 12 months. Thus, these are all balances of the company – cash, bank, applications, accounts receivable, inventory among others of the genre.
In turn, the current liabilities represent the debts of your company. It consists of the loans made, the taxes due and the payment of the salary sheet, and also include costs with suppliers and other expenses.
Thus, we arrive at the following formula: working capital = current assets – current liabilities.
And then reader, how did you like to learn a little more about working capital for entrepreneurs? Have we brought you any new information? If so, be sure to follow our social networks to continue deepening your knowledge of the financial market.