Ensuring that there is sufficient liquidity to meet short-term financial
obligations, and increasing the profitability of the company.
In order for a company to effectively manage their working capital, one must focus on two
primary objectives: ensuring that there is sufficient liquidity to meet short-term financial
obligations, and increasing the profitability of the company.
We acknowledge the complexity of that relationship, as companies choose to hold onto cash for
operational and sustainability reasons, yet also desire higher profits. Simply put, cash left
in coffers will not generate a rate of return, while suboptimal decisions to over-leverage,
and leave little in the till, could spell disaster.
A sensible approach to large business working capital lines of credit involve the coordinated
thinking of both the Finance & Sales departments of a firm.
A company's working capital policy should also take into consideration the nature of the business.
That is, a manufacturing firm may need to stockpile spare parts and accessories, while being owned
large amounts of money.
We acknowledge the complexity of that relationship, as companies choose to hold onto cash for
operational and sustainability reasons, yet also desire higher profits. Simply put, cash left
in coffers will not generate a rate of return, while suboptimal decisions to over-leverage,
and leave little in the till, could spell disaster.
A sensible approach to large business working capital lines of credit involve the coordinated
thinking of both the Finance & Sales departments of a firm.
A careful approach to borrowing
ensures that the total investment needed in current assets blends well with the overall
borrowing structure and repayment terms.
A company's working capital policy should also take into consideration the nature of the business.
That is, a manufacturing firm may need to stockpile spare parts and accessories, while being owned
large amounts of money
by their customers. In contrast, a food service company will have a large food stuffs inventory,
but will have few trade receivables. It is therefore obvious that the manufacturer must have a
carefully thought out approach to Accounts Receivable Finance, while the food retailer may not
grant credit at all, but need to leverage short-term working capital line of credit. Responsibility,
planning and timely execution are all characteristics of a solid approach to leverage.
That said, a large business working capital line of credit is a critical lever to maximize a company's
liquidity and flexibility.
Count on the Cardiff Bank to deliver such expertise.