Working Capital — the Missing Link in Your Business Growth Strategy
Insight Looking for a way to grow your business quickly? Learn how working capital can become a strategic asset for your company.
The secret weapon your business has been looking for to kickstart its growth strategy might already be sitting on your balance sheet.
When the time comes for businesses to look for the necessary funding to accelerate growth, outside sources of capital such as overdrafts, loans, and venture capital tend to be the first places they look.
But the truth is, working capital can be one of the lowest-cost sources of cash, providing your business with a strategic asset to fuel growth, and enabling you to secure competitive opportunities that might have once seemed out of reach.
How important can working capital be to your business?
Consider the case of Jay Klein, the founder and CEO of The PUR Company Inc., the world’s leading manufacturer of aspartame-free gum and mints. Klein was looking for a way to grow his business quickly, in order to move into strategic new markets. Accessing the working capital within his own organization enabled him to optimize his days payable and improve cash flow.
Having access to that cash quickly gave him the confidence he needed to make quick decisions. For Klein, a crucial source of capital came through his use of business charge cards. As an inventory-based business, PUR was always having to balance using capital to expand and to buy the inventory the company needed to get product onto store shelves. As the company grew, having flexible access to cash meant the company didn’t have to choose between a product or a marketing initiative.
It was no longer about one or the other, it was about having the purchasing power to do both.
Strategic asset to fuel growth
“At American Express we understand the strategic value working capital can have on the financial well-being of a business,” says Paul Roman, Vice President and General Manager of Global Commercial Payments at American Express Canada. “When Cardmembers use our payment solutions, their expenses can be interest-free for up to 55 days, enabling them to unlock hidden capital so they can put that cash to work in the interim — where it’s needed most.”
This working capital is widely recognized for its power as a source of funding for growth and securing competitive opportunities, but also for giving a shot in the arm to purchasing power — giving businesses the flexibility to help carry expenses and free up cash where it’s needed most.
But working capital isn’t just about flexibility; it can also play a major role in improving relationships with partners and suppliers. For example, when a business can leverage an extended grace period, it can then achieve the strategic balance of keeping vendors happy with swift payment while conserving cash to use for strategic purposes.
These kinds of practices can spur better relationships with suppliers, and might even enable management teams to build more collaborative relationships with supply partners, leading to bigger deal volumes and preferential treatment.
“When used effectively, this underused form of capital can have a significant impact. Businesses should start looking at cash flow not only as a source of growth capital but as a strategic lever for maximizing payment arrangements,” says Roman. “Optimizing cash flow using charge cards and other payment solutions can lead to process improvements across the board, giving businesses the financial flexibility they need to grow.”
You’ve already got the secret weapon you’ve been looking for, you just have to unlock its power.