Working Capital is a big determinant of mid market business success.
According to research by a big 4 accounting firm, 15% of directors in ASX 300 companies have had to say to Investors “We Have a Problem” based on a shortage of working capital.
Lack of sufficient cash flow can be a big inhibitor to business growth, especially as businesses fail to pay suppliers or workers. Therefore, effective working capital management should be of paramount importance to businesses.
Research suggested that companies that effectively managed cash flows and working capital, outperformed competitors in 2016, while those that lacked access to sufficient working capital showed slower growth or signs of financial distress.
Ensuring a reliable range of funding, an appropriate level and mix of term debt and working capital is critical to business success. Given that we currently have an environment of historically low interest rates it makes it all the more important for businesses to use this form of funding in their capital structure to boost returns.