Managing Capital

When businesses speak of managing capital or working capital, typically we are talking about one of two things: Finding sources of capital through banks, financial institutions, venture capital, seed capital, angel investors and the like; or Managing the ways a business uses capital - this discussion tends to be around managing working capital. What is working capital? Working capital is the amount of money your business requires to operate. Working capital management solutions are usually information technology solutions that will help track financial performance as well as process performance. Inefficient processes can lead to excessive use of cash, so improving those processes is like plugging holes in your financial dam, preventing cash from leaking out. The benefit of improving working capital and managing your processes is that the organization is able to free up capital for other activities such as research and development, merger and acquisition activities or paying share-holders dividends. Next, we will look at both sources of working capital and how to improve working capital.