Problems You’ll Encounter If You Don’t Have Sufficient Canada Working Capital

If you own or manage a small business in Canada working capital should always be monitored. Just about every business in the world has to make sure that they’ve got access to sufficient working capital all year round. This is how they stay ahead. And this is how they survive.

But let’s define working capital for a moment, so that we’re all on the same page. Working capital is when you take into account all your resources that you can easily turn into cash within a year (current assets), minus all the debts that must be paid back with the year (current liabilities). In short, working capital refers the efficiency and current health of your business. If you lack sufficient working capital, you may encounter several serious problems:

  1. It’s more difficult to find investors for your business. Without sufficient working capital, you demonstrate that your business doesn’t have the ability to earn a positive return for investors or pay back a loan to lenders. As a small business in Canada working capital deficiency may prove too much of a risk. And without investors and creditors, you seriously hamper your business’s ability to acquire crucial resources.
  2. You miss out on great hires. Finding the right employees to work for you can really help your business grow considerably. It’s not just that the superstar employees may not work for you because you don’t have the means to pay them a fair compensation. Sometimes you may even have to forgo hiring staff that you really need. When your employees are using too much time and effort on jobs in which they don’t have the skill (typing reports, figuring out Excel, selling products, etc.), the lack of sufficient working capital can be truly detrimental.
  3. You can’t run day-to-day operations efficiently.  You need to purchase equipment and inventory, you need to buy supplies, and you have to pay your employees. If you make do without the necessary supplies, equipment, and inventory you can affect your profit margins, and any trouble with salaries can affect employee morale and efficiency.
  4. Emergencies can be terrible and even fatal to your business. What if some unforeseen circumstances not covered by your insurance cause you to lose your inventory? How will you replace them, if you don’t have the working capital to make the necessary replacements? This is just one possible emergency that can happen. In the business world, emergencies tend to happen on a regular basis, and the lack of working capital can end your business permanently.

In Canada working capital must always be overseen so that they remain sufficient for all the company’s needs. If they’re not, steps must be taken to correct it. Perhaps sales revenues can be boosted, or some long term assets can be converted to cash to solve cash flow problems.

If you have some difficulties with your working capital, do check out our services at www.neebocapital.com.

 

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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