How to Improve Working Capital Management?
Improving how a business handles its working cash is important for its overall health and productivity. Working capital is the difference between the present value of a business’s assets and current liabilities. Working capital management is the process of making sure that a company has enough cash to meet its short-term responsibilities while also running as efficiently as possible. Here are some ways to better handle your working capital,
1. Cash Flow Forecasting: Make correct cash flow forecasts to figure out how much cash the company will need in the future. Revise your predictions often to account for changes in the economy, the market, and how your business runs.
2. Inventory Management: Make sure that you don’t have too much or too little inventory by adjusting your stock amounts. Use just-in-time inventory tools to cut down on the cost of holding on to things. Talk to the vendors about good terms to speed up the turnover of your inventory.
3. Accounts Receivable Management: Make sure customers pay on time by putting in place good credit policies. Keep a close eye on accounts receivable and follow up on payments that are past due. Give incentives for payments made early to encourage people to settle quickly.
4. Management of Accounts Payable: Work out good payment terms with sellers without hurting relationships. Use savings for paying early. Set a strategy priority for paying suppliers.
5. Working capital financing: Look into different ways to get money, like short-term loans or lines of credit, to cover short-term cash flow gaps. Think about other ways to get money, like supply chain lending or factoring.