Working capital: Giving cashflow some love to manage peaks in demand

Kelly Green, regional director for the North East at Lloyds Bank Commercial Banking, explains how good working capital management can help North East firms take advantage of Valentine’s Day and 2019’s other special occasions.

Valentine’s Day is here, and as couples from Northumberland to Darlington prepare to celebrate, North East businesses are set to feel the love too.

According to GlobalData, consumer spending this Valentine’s Day is predicted to exceed £1bn. As businesses look to cash in, planning now can ensure others are well-set to capitalise on special occasions later in the year that create extra demand and offer an opportunity to increase sales.

Peaks and troughs

As well as offering opportunities to boost revenues, busy trading periods like Valentine’s Day, the May and August bank holidays, Halloween and – most significantly – Christmas can put pressure on businesses’ cashflow.

As firms look to extend opening hours, buy more stock or create seasonal jobs, financial flexibility becomes essential. It means businesses have the resources to benefit from spikes in demand while maintaining resources should trading turn out to be less successful than expected. 

Working capital 

One way firms can achieve this flexibility is through effective working capital management. Working capital is the amount of money tied-up in the day-to-day costs of doing business – including things like unpaid invoices and stock- and it tends to increase as a company grows.

Our most recent Working Capital Index found that businesses across the North of England have more than £116bn ‘tied up’ in working capital. This is money that could otherwise be used to help companies better react to fluctuations in demand and invest for future growth.

Businesses can boost cashflow by shortening their working capital cycle – the amount of time it takes to turn assets into cash. Banks offer a range of tools to support this. Solutions such as invoice financing can help release up to 90% of the value of an unpaid invoice within 24 hours, while asset-based lending can leverage the value of a firm’s assets such as stock and equipment to unlock required cash.

As well as offering access to specialist working capital solutions, Lloyds Bank has committed to lending up to £700m this year to firms across the North East as part of our Helping Britain Prosper pledge. This is funding that can help businesses develop flexibility and ensure they’re equipped to make the most of opportunities to come.  

We’ve also developed a working capital management tool that can help companies better understand their cashflow and identify pressure points within their business.

As firms look beyond Valentine’s Day to the trading landscape ahead, sound working capital remains at the heart of capitalising on opportunities for growth.

Ashleigh Smith
Article by Ashleigh Smith
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