No matter the type and sector of a company you own, working capital is an important factor to be considered while accessing the long term financial growth and health of your company. The amount of working capital available to your company can be found out by comparing your current assets with your liabilities. Monitoring working capital is one of the most important tasks for any business because that’s the only way to ensure that your company maintains enough cash flow in the future to cater for its short term objectives. Below enlisted are 3 tips for efficiently handling working capital
Manage Inventory and procurement
To utilise your working capital the most, effective management of Inventory is extremely essential. Piling up of excessive stock would be burdensome on the money resources of any business. While insufficient stock would cause a loss in sales and hamper your customer relations. Therefore, it’s important to know what you buy and sell. You should also try to streamline and centralise your purchasing process.
Pay vendors timely
Implementing payment rules and discipline within your enterprise is a key part of maintaining a sound payment process. Studies of working capital levels show that the highest improvement of this sector comes from good regulars payable performance. Enterprises, which release worker’s payments on time develop better customer relations and hence negotiate better deals, discounts, and payment terms.
Manage debtors effectively
To maintain your working capital, you need to ensure that money is coming on time. Reassess and review your credit and contract terms with debtors from time to time. Don’t give too big a window to pay for services, else it might affect your company’s cash flow. Make sure CFOs revise credit terms with your company’s management to make sure that the amount of credit that is being offered to debtors is not more than what your company’s cash flow requires. To lessen debts, you must implement strict credit checks and effective credit regulation procedures.
For funding your working capital in the right way, you have to determine what your company’s requirements are. For better suggestions and recommendations, you must consult a Working Capital Loan Advisory Singapore. There are several means and solutions for financing your company that caters to various requirements. So you must know which solutions are to be applied when. For that, it’s important to discuss your plans and requirements with financial advisors.