The events of the last twelve months have illustrated how important the financial key performance indicators of any business are. The ability for the status quo to be turned upside down and spun around has impacted several businesses quite significantly with lockdowns, border closures and general fear occurring due to the COVID-19 virus. Working with businesses across a few different industries we have been able to firsthand witness which businesses have done well and rode the wave and which businesses have sunk and been swept away by the tide.
A few different financial key performance indicators have shown to work in keeping on top of how things are tracking. Indicators such as profitability, margins, return on labour, debtor days and creditor days are just a few that can be monitored each day. All these measures give business owners different viewpoints of how a business is performing.
At RobertsCowling one of our key indicators that we apply to all businesses is their Working Capital number. Some of the businesses that have shown the ability to withstand the variable nature of Covid-19 and come out better for it have been the ones that have shown that they have a strong understanding of their working capital and working capital requirements.
Working Capital calculates the amount that is available to fund and pay for most of your current liabilities from items such as cash assets and debtors/receivables. These liabilities tend to cover traditional current liabilities such as trade accounts or creditors, ATO liabilities such as GST, PAYG withholding, taxation and Superannuation liabilities.
Traditionally these are the areas which cause business owners the greatest stress, as these are the amounts that fall due in the shortest timeframe and have the most immediate impact. It is extremely important to identify the working capital requirements that each business has and how you are currently placed.
In having this number front and centre we can work with business owners to ensure that they understand this number but also assist them in ensuring that the business can find additional working capital (if required) to meet its current obligations. This ability and reporting have helped us assist business owners with navigating the challenges of the past twelve months. If you are currently unsure of what your businesses working capital requirements are, please get in touch to have a chat.