Working capital is the fuel on which every business runs, and once the fuel begins to run low, the company will eventually grind to a halt.
Failure to devote enough resources to working capital management can inextricably damage even the best run companies. Indeed, there are few businesses that would not benefit from either improving their working capital management or by ensuring their assets work harder.
Commenting, Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency said, “It is often the most dynamic businesses that are at greatest risk from failing to ensure that internal systems and controls match the pace of growth. The effects of failing to manage working capital can be severe and in many cases fatal.”
Mr. Irwin believes that time can be bought by sourcing additional working capital funding. This could be debtor finance, fixed asset finance or even revised bank and term loans. However, he warns that this particular route would only be appropriate if there is a strong corporate will to see the job through to the end which would, in all probability, entail strategic reviews and significant changes in capital management procedures. Otherwise the additional costs of borrowing could only add to the ills of the business.