The great American essayist and philosopher Ralph Waldo Emerson once wrote, “Money often costs too much.” In challenging times like these, that’s especially true for many companies.
Efficient markets are good for business and a marketplace solution for the distribution of working capital has the potential to open the floodgates of liquidity for hundreds of millions of businesses around the world.
Working capital is water for commerce and it’s as important to business life as water is to biological life. The problem is that much of this liquidity is trapped. To ensure a strengthened financial system, it is critical to create working capital markets that can deliver capital for every company that needs it.
Every organization, whether public or private, profit-oriented or not, irrespective of its size and nature of business, needs an adequate amount of working capital. Every company clearly understand that efficient working capital management is the most crucial factor in maintaining survival, liquidity, solvency and profitability of their organization.
Challenges in managing working capital
Typical working capital needs of a company are generally areas of raw material cost, inventory holding and transit cost, receivable holding cost, and processing and operations cost. Companies face challenges like locked cash in receivables, bank lines fully drawn, collaterals and equity capital fully deployed in trying to cover the above-mentioned costs, while their cash needs for fresh purchases and continuing operations still remain unmet.
While the economy recovers in U, V or L pattern, businesses need to meet their fixed expenses like salary, rent, interest, etc. and also take care of their debt repayment obligations. They also have to keep a close watch on accumulation of liabilities to their creditors and banks, as this could pose a short- to medium-term supply chain disruption threat.
Additionally, monitoring the supply chain health is important as suppliers will need regular flow of liquidity to procure raw materials and fulfill the orders. In an opaque market, the underwriting of credit is inefficient and costly. There are limitations of financial institutions to create a transparent view of working capital finance for both small and large companies. Traditional financial intermediaries, whether they are banks, asset-based lenders, factors, or others, simply don’t have visibility to both sides of the accounts receivable (AR) and accounts payable (AP) equation.
Improving access to liquidity
Like sands on a desert plain, the working capital needs for businesses can swirl and shift. In times of economic uncertainty, those changes can occur on an almost daily basis. To ensure healthy cash reserves, companies will always want to balance the liquidity flow and maximize returns on their cash.
For suppliers, having cash flow within their supply chain is critical for their business continuity. Typically, borrowing and loans may seem the only way out for these suppliers to access the required cash flow. As more companies struggle to access external funding, they may find it difficult to access affordable funding options or end up becoming frustrated with the broken system and endless processes.
Way forward: FinTech becoming an alternative & reliable option
Fintech platforms like C2FO help companies to improve their own and their vendor partners’ access to liquidity, such that the solution brings efficiencies in a company’s treasury and payment processes to drive cost optimization and improved operating margins.
Financial tools on C2FO platform provide faster and more flexible funding solutions, enabling enterprises of all sizes to manage their working capital needs, creating a seamless match between AR and AP, thus enabling efficiency in cash flow between trading partners. While suppliers can take control of their cash flow, companies can increase EBITDA and gross margin, and earn a better return on short-term cash, which improves the financial health of their supply chains.
The flow of business runs exponentially smoother as everyone in the company’s ecosystem has the capital they need to operate and grow, thus strengthening business relationships. In both times of either prosperity or uncertainty, having greater control over the movement of cash is beneficial for the company and its extended ecosystem. The flexibility and ease of using the a globally acclaimed FinTech platform like C2FO provides more resources for working capital with less risk, greater certainty and fewer complications than traditional forms of funding.
C2FO offers a wide range of funding solutions, all on a single, easy-to-use platform. Companies have the option to either use their own cash or access funding through C2FO’s funding network, ensuring that the company and their vendor partners have access to affordable capital at all times!
C2FO is the world’s largest platform for working capital. We serve over one million businesses representing $10.5 trillion in annual sales across more than 180 countries. Our online platform connects more than $100 billion of daily accounts payable and accounts receivable. Whether you need working capital or have excess working capital, Name Your Rate™, and the C2FO platform will match your request in seconds. You can accelerate or extend AP or AR on demand, providing you, your customers and your suppliers greater control over cash flow. You can also utilize AR financing and other data-driven funding options.
C2FO is working capital, working for everyone. Our mission is to deliver a future where every company in the world has the capital needed to grow. To learn more, visit C2FO.com.