Improving working capital a top priority for small business owners in Alberta

By The IJ Staff | October 13 2017 09:45AM

Fifty-six per cent of Alberta business owners said they are actively taking steps to improve their working capital, according to the latest issue of ATB Financial Business Beat.

These survey results demonstrate a resolve to restore balance sheet liquidity and to think positively about preparing for growth, says ATB. When it comes to top factors impacting their working capital, over a quarter of respondents (26 per cent) cited the current state of Alberta's economy.

Cash is king

"Cash is king for business owners. This makes working capital especially critical during a downturn, because that's when sales are decreased or customers are taking longer to pay, which limits cash flow," stated Teresa Clouston, ATB Executive Vice-president, Business and Agriculture in an Oct. 12 announcement.  

While respondents cited varied strategies for growing their working capital, 43 per cent said they are minimizing staffing levels, and 41 per cent are trying to stay competitive by introducing more favourable terms into their negotiations. When asked if they had taken any other steps to improve their working capital situation, 26 per cent of those who had taken steps cited expansion and/or company growth.

Using personal savings

In addition to this, 31 per cent said they have pulled funds directly from personal savings to supplement working capital needs, while 20 per cent have chosen to postpone payments on principal debt to keep cash flow available.

"While business is certainly personal, business owners should try to avoid dipping into their own savings and instead consider quick, helpful solutions to get them through a crunch," says Clouston. "Some examples include deferring payments, extending amortization dates, consolidating debt and negotiating with suppliers."

On the whole, while most small business owners (69 per cent) rated themselves high in their understanding of working capital, 30 per cent rated their comprehension as moderate to low. Twenty-nine per cent indicated they have never sought professional advice about managing working capital and only two per cent are assessing effective working capital management on a daily basis.