What Is Working Capital?
Working capital refers to the money required for daily operations, such as:
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Paying suppliers
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Covering payroll
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Managing inventory
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Paying rent and utilities
When working capital reduces, operations slow down and financial risk increases.
Why Do Companies Face Working Capital Problems?
1. Slow Customer Payments
Late invoices restrict cash flow.
2. Excess Stock
Inventory ties up cash that could be used elsewhere.
3. High Operating Costs
Rising expenses reduce liquidity.
4. Poor Financial Planning
No visibility on upcoming cash requirements.
5. Debt Pressure
Large loan repayments drain operational cash.
Ways to Release Working Capital
1. Invoice Financing
Receive funds instantly instead of waiting for customer payments.
2. Asset Refinance
Use existing company assets to generate cash.
3. Cost Restructuring
Reduce operational costs and redirect funds to important areas.
4. Supplier Renegotiations
Better payment terms improve cash flow.
5. Business Restructuring
Reorganise company operations to free up locked capital.
Conclusion
Working capital issues are common, but with the right strategies, they can be resolved quickly. Proactive planning protects the company from unnecessary financial stress and supports stable growth.