A report less than two years old observed Rs.24.7 lakh crore disbursed in credit funding to MSME enterprises, the majority of which served in fuelling working capital needs.
A more recent report suggested a significant growth in digital lending, which is currently hoping to touch the benchmark of Rs.7 lakh crore in credit disbursement just through its digital platforms.
While it can be easily understood that business financing has been growing in India, potential borrowers should also note how to fill their working capital needs.
For individuals who are running academic institutions, this is even more essential considering many young students are dependent on their school.
Consequently, since shutting down even temporarily can lead to consequences, school administrators should note these options below to maintain smooth cash flow and efficient functioning –
● Collection of remuneration
For schools and other similar academic institutions, the primary source of revenue is that of remuneration and school fees which are usually paid monthly or quarterly.
As an administrator of such an institution, it is vital to maintain these records and ensure that every payment is cleared on time.
While academic institutions often make exceptions in terms of fees to exceptional students, this should be accompanied by an alternative revenue source.
Without an alternate source, there can be a severe working capital crunch, which in turn can hinder an institution’s normal functioning.
● Inventory management
While learning to ensure a business does not run out of working capital, one of the first steps is that of mastering inventory management.
Even though an academic institution is not wholly run like a business venture, it still follows its primary model of generating revenue by offering a service. Consequently, school administrators and owners should learn to manage their inventory.
This includes not just that of safeguarding its employees, but also that of stationery supplies and other requirements.
Extending the longevity of existing assets is another crucial aspect that involves maintenance of school building, repairing of furniture, stocking of laboratory supplies, etc.
● Shedding avoidable expenses
There can be many avoidable expenses like excursions, tours, etc. While such costs are necessary for the overall growth of the students of an institution, these must be curbed or avoided under specific circumstances.
This includes situations when there is a shortage of working capital funds owing to unforeseen expenses which might come up at any time.
Under such circumstances, administrators should look to introduce some alternative event which can be conducted at a lesser expense.
● Ensuring consistent staff salaries
Along with teachers, there is much non-teaching staff involved in an academic institution. As school owners, it is vital to maintain these staff properly since, without their contribution, it is not possible to run a school.
While there are many operational costs that are also involved in running a school, it is the remuneration of these staff which primarily dictates how much working capital this venture needs.
Subsequently, the salaries of these individuals must be cleared on time to ensure their commitment to an institution.
● Availing lines of credit
While this option of availing a business loan is generally necessary if it is not possible to maintain a school’s cash flow, there are certain other circumstances that can lead to such a situation too.
The sudden necessity to develop a laboratory, upgrading playgrounds, and other such financial obligations can also put pressure on the reserve capital of a school, thereby impacting its working capital funds.
Under such circumstances, school administrators can avail of business loans offered by various financial institutions. Usually sanctioned without any mortgage, these loans have a repayment tenor extending up to 60 months.
Furthermore, NBFCs like Bajaj Finserv also provide pre-approved offers that make loan applications convenient and fast. Such offers are provided on various financial products like business loans, personal loans, etc.
If an academic institution is availing a school loan, it must maintain the repayment structure diligently since defaulting can lead to detrimental circumstances which will also impact many learners. This includes calculating EMI amounts beforehand to ensure there is no difficulty in payments.
By following these tips mentioned above, schools can effectively maintain their working capital. They will not come across any hindrances, whether it is financial or otherwise.