• support@bizmanualz.com
  • Home
  • Contact Us
  • About Us
  • Help
  • My Account
Policies and Procedures Manual Template WordPolicies and Procedures Manual Template WordPolicies and Procedures Manual Template WordPolicies and Procedures Manual Template Word
  • Policy
    Procedure
    Manuals
    • CEO 9-Manual Set-45% Off
    • CFO 5-Manual Set-34% Off
    • Policy Procedure Software
    • Accounting Manual
    • Finance Manual
    • IT Policy Manual
    • HR Policy Manual
    • Sales Marketing Manual
    • ISO 9001 Quality Procedures Manual
    • AS9100 D Quality Procedures Manual
    • ISO 22000 Food Safety HACCP Manual
    • Production Operations
    • Medical Office Procedures
    • Nonprofit Procedures
    • Construction Procedures
  • Document
    Management
    Software
    • Product & Benefits
    • OnPolicy Software Overview
    • On-Policy – 30-Day Free Trial
    • Testimonials
    • Resources
    • Subscribe to OnPolicy
    • Software, Procedure Manual Bundle
    • OnPolicy Help Introduction
  • Free
    Procedure
    Samples
    • Free Sample Policies and Procedures Template
  • How To
    Business
    Articles
    • Save Time Writing Procedures
    • Write Better Policies
    • Writing Procedure Manuals
    • Write Better Procedures
    • Strengthen Your Financials
      • Set Better Objectives
      • Tighten Accounting Controls
      • Improve Company Governance
      • Simplify Compliance
    • Obtain ISO Certification
      • Make a Process Map
      • Implement ISO Quality
      • Improve Quality
      • Improve Management Systems
      • Increase Customer Satisfaction
      • Make Your Business Lean
    • Solve Business Problems
      • Organize Your Business
      • Improve Business Communication
      • Be a Better Boss
      • Empower Employees
      • Making Change Easier
      • Grow Your Business
      • Find Business Improvements
      • Improve Business Processes
      • Increase Innovation
      • Better Sales and Marketing
      • Better Project Management
    • Leverage Technology
      • Automate Policy Management
      • Improve Your Social Media
      • Increase Productivity
  • Lean ISO
    Consulting
    Training
    • Improve Your Training
    • Customer Testimonials
    • ISO 9001:2015 Classes | Internal Auditor Training | Virtual
    • ISO 9001:2015 Classes | Lead Auditor Training St Louis MO
    • ISO 9000 Help | Lean Consulting Training St Louis MO
    • ISO Writer | Writing Policies and Procedures Training Class
    • Lean Training Class St Louis MO
    • FREE Quality
      Audit* Offer
0

How Much Business Capital Do You Need?

Categories
  • Strengthen Your Financials
  • Tighten Accounting Controls
Tags
  • business
  • capital
  • cash flow
  • planning

Do you know how much business capital your company needs to fuel your growth? Balance debt and equity to optimize your financial management.

Business Capital is the most critical component that fuels your company and keeps it safe from sharks in the banking world. Without it, organizations can’t grow, but how do you know how much your business really needs? Having too much or too little cash can both be detrimental to your organization. You don’t have to be a CFO or finance expert to understand how cash flow works within your company, but it might help.

There are two main processes at work in any organization: capital planning and working capital management. Let’s look at how the capital planning process works.
business capital

Checkbook Accounting

The most common form of working capital management is what many refer to as “checkbook accounting?. In other words, if you have money in the checking account then you can write a check to cover the expenses, if you don’t then some payable is going to be put off until next week. Sound familiar? While this might be how many small organizations execute financial control (and perhaps how many individuals manage their own finances), it is not an effective way to manage your business finances.

The opposite can also be true. Cash can pile up in your checking account faster than you can spend it. So, at some point we have to start planning our capital strategy, which begs the obvious question “How much business capital do you need?

Business Capital Needs Analysis

Your company capital needs are based on your revenue growth and your cash flow situation. Revenue growth comes from increasing the sales of your products or services, which in turn requires increases in expenses, assets, and working capital to fulfill those sales. This may seem obvious, but what is not so obvious is that there is a ceiling to this growth. Your growth is limited to your equity growth.

Growing Equity

Equity increases either as a result of adding to retained earnings, which comes from your profits, or by asking investors to invest in your business. Here is where profit becomes important. Since profit is taxable, many would prefer to report as little profit as possible in order to reduce their taxes. Profit, however, adds to retained earning to create equity growth and allow for increased debt capacity via your debt-to-equity ratio. We need profit to fuel future revenue growth, and profit is what is demanded by investors.

If your revenues are growing faster than your equity then you assets must be growing too and since assets = liabilities + equity then your liabilities must be growing faster than your capacity to pay for those liabilities, i.e. your equity. Therefore, your equity equals your capacity for growth. If you don’t grow your equity in line with your revenues then you will be running out of cash and be forced to raise capital.

Debt-to-Equity

The first choice for many may be debt but, your debt load is bounded by both your debt-to-equity ratio and your Earning Before Interest Taxes Depreciation and Amortization (EBITDA) or cash flow.

Your debt-to-equity ratio is calculated by dividing your debt by your equity. A ratio of one or less is considered good, whereas ratios greater than one starts to increase the lenders risk. Risk tolerances vary by industry so there is no golden rule above one.

  • CFO Responsibilities Financial Accounting Procedures

    5-Manual CFO Internal Control Procedures Bundle| Save 34%

    Rated 4.64 out of 5
    $ 1,695.00 $ 1,497.00
  • Accounting Policy Procedure Manual MS-Word Template

    Accounting Policies and Procedures Manual

    Rated 4.60 out of 5
    $ 495.00 $ 397.00
  • Finance Policy Procedure Manual

    Finance Policies Procedures Manual | ABR42M

    Rated 4.75 out of 5
    $ 495.00 $ 347.00

Operating Cash Flow or EBITDA

You can only borrow debt up to your ability to make debt payments with your operating cash so your debt is bounded by your EBITDA, which is a measure of your operating cash before financial expenses like interest, tax expenses, or depreciation (amortization or depletion). Since depreciation and amortization are non-cash expenses for tax purposes, EBITDA represents the raw cash produced.

Note that interest is usually a deductible expense, so as you increase your debt, you also increase your interest expense, which lowers your taxes paid.

Profit Drives Growth

We have seen how profit is used to drive growth, which is one aspect to cash needs. The other side is based on what you are going to do with the cash. You can purchase assets, use it for other expenses, hold it, pay down debt, or give it to the shareholders. Think of spending cash as investing, and investing is about understanding the Return On Investment you are about to make.

Download Free Policies and Procedures to see how easy it is to edit MS Word Templates to build your own financial policy and procedure management system.

More Articles from Bizmanualz...

  • Pros and Cons of Bootstrapping Your StartupPros and Cons of Bootstrapping Your Startup
  • What Is Your Business Return on Invested Capital?What Is Your Business Return on Invested Capital?
  • How to Manage Working CapitalHow to Manage Working Capital
  • How to Find Capital Using Inventory ProceduresHow to Find Capital Using Inventory Procedures
  • How To Start Writing A Blog About Your BusinessHow To Start Writing A Blog About Your Business
  • How Can Technology Improve the Efficiency of a Business?How Can Technology Improve the Efficiency of a Business?
  • How Small Businesses Can Attract Top Employees OnlineHow Small Businesses Can Attract Top Employees Online
  • How to Build a Business Ethics ProgramHow to Build a Business Ethics Program
  • How do you write a business plan for a startup?How do you write a business plan for a startup?
  • How to Migrate Your Business to the CloudHow to Migrate Your Business to the Cloud
Share

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Products

  • AS9100 D Quality Procedures Manual AS9100 Quality Procedures Manual Rev D | ABR217M Aerospace Quality Procedures Manual $ 395.00 $ 297.00
  • Accounting Policy Procedure Manual MS-Word Template Accounting Policies and Procedures Manual
    Rated 4.60 out of 5
    $ 495.00 $ 397.00
  • Finance Policy Procedure Manual Finance Policies Procedures Manual | ABR42M
    Rated 4.75 out of 5
    $ 495.00 $ 347.00
  • it standard operating procedures IT Policies and Procedures Manual
    Rated 4.40 out of 5
    $ 495.00 $ 397.00
  • Human Resources HR Policy Procedure Manual HR Policies and Procedures Template | ABR41M
    Rated 3.89 out of 5
    $ 495.00 $ 347.00
  • Sales Marketing Policy Procedure Manual Sales Marketing Policies and Procedures Manual | ABR44M
    Rated 3.67 out of 5
    $ 495.00 $ 347.00
  • Security Policy Procedure Manual Security Policies and Procedures Manual $ 395.00 $ 297.00
  • Disaster Recovery Policy Procedure Manual Disaster Recovery Planning Manual
    Rated 4.00 out of 5
    $ 395.00 $ 297.00
  • ISO 9001 Procedures ISO 9001 2015 Procedures | ABR211M
    Rated 4.60 out of 5
    $ 495.00 $ 347.00
  • ISO 22000 Food Safety Procedures Manual ISO 22000 Food Safety Procedures Manual | ABR213M
    Rated 3.83 out of 5
    $ 395.00 $ 197.00
 Free Sample Policies Procedures

Get to Know Us

About Bizmanualz

Our Customers

Our Contributors

Featured Products

Free Policies and Procedures

Privacy Policy

FAQs

Risk Free Guarantee

Process Improvement

Contact Us

Recent Posts

  • Do You Make These Quality Mistakes?
  • What Effective Methods Help Manage a Virtual Office?
  • What Is Lean Product Development?
  • Why is Consistent Quality Important?
  • How to Transfer A Large File
  • What Does ISO Mean?
  • How has COVID Impacted Business Process Management?
  • What Are The Safety Measures in Your Workplace?

Business Procedures

Accounting Manuals Template

Finance Procedures

HR Procedures

IT Policies and Procedures Templates

Sales Marketing Procedures

Quality Assurance Policy Statement and Procedures

Medical Office Procedures

Employee Handbook Manual

Aerospace Procedures

Food Safety Procedures

Security & Disaster Plans

Production Procedures

Procedure Writing Guide

Featured Manuals

  • Alt Text CEO Bundle and Document Management Software Package $ 2,495.00 $ 1,857.21 one time, and
    $ 990.00 / year
  • St. Louis ISO auditor training class ISO 9001:2015 Classes | Lead Auditor Training St Louis MO $ 2,395.00 – $ 3,270.00
  • 9-Manual CEO Company Policies and Procedures Bundle | Save 45%
    Rated 4.50 out of 5
    $ 2,495.00 $ 1,997.00
  • CFO Responsibilities Financial Accounting Procedures 5-Manual CFO Internal Control Procedures Bundle| Save 34%
    Rated 4.64 out of 5
    $ 1,695.00 $ 1,497.00
  • AS9100 D Quality Procedures Manual AS9100 Quality Procedures Manual | ABR217M Aerospace Quality Procedures Manual $ 595.00 $ 499.00
Copyright ©1999-2020 Bizmanualz, Inc. All Rights Reserved | Sitemap | Privacy Policy
0
  • Home
  • Contact Us
  • About Us
  • Help
  • My Account