Proven Ways To Improve Your Business’ Working Capital

Working capital is required for the smooth running of a company’s everyday operations. The more the working capital a business has access to, the safer & better it is for any organization. Improving a business’ working capital denotes greater financial stability. Therefore, every company should be on the lookout for ways to improve its working capital.

Why Increase Working Capital

  • To earn more profits

  • To issue stocks

  • To overcome debts

  • To increase the inflow of cash

  • To reduce cash outflow

  • To increase the accounts receivables

Ways to Improve Working Capital

  1. Install and set up excellent and latest enterprise resource planning (ERP) tools and other related information systems to carry out business operations efficiently. Good systems should be easy to use and critical in cash conversions.

  2. Maintain high standards of recording and bookkeeping in order to track all payments, due dates, deductions, short-pays, hierarchies, billings, receivables, and others. A good system should be able to aggregate all information and provide detailed insight to all outcomes.

  3. Ensure to contact and send as timely reminders to all concerned parties for timely payments. No issues regarding invoices, terms & conditions, taxes, or freight should arise.

  4. Double-check all calculations for cent percent accuracy in order to take timely actions and to prevent any missing leads, a hindrance in task execution, and lowering productivity. Every sales region and every individual division needs to be verified and accounted.

  5. Do background checks of the payment behavior of every party involved with the business in order to assess risks, calculate cash conversions, and carry out follow-ups.

  6. Periodically check the selling & non-selling products and corresponding performing & non-performing inventory to allocate capital effectively.

  7. As in every business, it is very important to maintain high levels of communication standards while working with the business’ working capital.

  8. Include automation techniques to improve business processes and to empower staff to perform better. This will contribute to the business’ overall productivity.

  9. Encourage employees to work effectively by linking employee goals and rewards to the business’ untapped working capital. This will also encourage creativity among employees to perform efficiently.

  10. Incorporate the power of technology and existing business processes to witness a substantial impact. Thus, adopting the best practices to help your business improve its working capital and the total liquidity value even when the business revenues are low or undergoing a declining phase.