Benefits of a positive working capital

 

Improved Liquidity

Organizations achieve a consistently high level of working capital to ensure that ample cash for any possible future prospects or unforeseen scenarios is available. It also helps businesses to be versatile in how they work so that they can meet consumer orders, grow and invest more efficiently in new products.

Operational Efficiency

Any potential barriers to market practices are evaded by optimal use of working capital management. A 'protection net' may be given to protect against production failure or payment delays by suppliers.

Increased Profits

Only when areas like accounts payable and payable run effectively, can a high level of working capital be achieved. To be effective, both departments must ensure that they pay their suppliers in compliance with the agreed conditions which result in early payment discounts being collected and cash income increased.