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Working Capital Management

Working capital is the fuel that keeps companies running. A shortage of working capital is one of the most common reasons for business failure. If an enterprise intends to grow and prosper, they will need additional funds to invest in new projects and opportunities.

When making a decision to add new equipment, many organizations underestimate their ongoing and future needs for working capital. Before deciding to purchase equipment from cash flow, consider whether those funds might earn a better return by being invested in any of the other areas listed below:

Inventory on Hand
Carrying a larger stock of inventory to provide faster delivery of customer orders is a proven strategy for increasing sales. The capital investment required to have additional stock on hand can be an obstacle for many businesses.

Volume Purchasing
Many suppliers will offer significant discounts for larger orders. Having the working capital available to take advantage of volume purchase discounts can result in a lower cost of goods sold and increased profitability.

Purchase Discounts
Suppliers will often grant a discount for prompt payment of invoices. Paying early and taking the discount available under terms of "2% - 10, Net 30" is the equivalent to earning a 36% return on cash on deposit.

Advertising & Marketing
A well-directed marketing campaign does not have to cost a fortune and can provide a significant return. Many companies have trouble finding the funds necessary to sustain long-term marketing efforts that will make them successful.

Accounts Receivable
Offering special credit terms to select clients can make sales proposals more attractive. having the capital available to be flexible in this way can provide a substantial competitive advantage.

Purchasing Premises
Purchasing equipment and assets that lose their value over time may not be the best use of a firm's capital. Investing in real estate by purchasing rather than renting the business premises may pay long-term dividends. This asset usually appreciates in value over time, providing an additional return for shareholders.

Leasehold Improvements
Better operational efficiency, an update of the company's image, and a boost in employee moral will often result from an investment in leasehold improvements.

Employee Compensation
Increasing staff compensation levels and improving benefits programs can help to attract and retain quality personnel. Improvements in productivity and reductions in employee turnover are also likely to result from such an investment.

Employee Training
Formal programs to ensure that all staff members are familiar with the advanced technology used in your business can pay big dividends in higher productivity.

Other Uses:
Income Taxes Payable
Retiring Unfavourable Debt
Retiring Shareholder Loans
Internet and E-Commerce Projects
Research and Development Costs
Patents, Trademarks or Copyrights
Seminars & Conferences for Management
Quality Certification Program (i.e. ISO9000)


Westport Leasing Corporation
11198 - 84th Avenue Box 33026
Delta, B.C. CANADA V4C 2L7

Phone: (604) 681-1260 | Toll Free: 1 (800) 667-0747
Fax: (604) 681-1680 | Toll Free Fax: 1 (800) 667-4426