Business Tips for Improving Your Working Capital

The lifeblood of a business is its cash flow. A business owners main goal is keep that cash flowing and to use it for generating profit. When a business running smoothly and taking in profit, then it will undoubtedly have cash surpluses. If these things are not happening for you and your business does not have this cash surplus, expect to run out of cash and go out of business.

In today’s world of business, cash has once again become king. Actually, cash is earnings and worth more than inventory to many businesses as their financial managers try to maximize it whenever and wherever it is possible. Here are a few ways you can improve your business through gaining working capital:

  • Proper cash flow forecasting is what working capital management is all about. Yours should include the impact of unforeseen events, fluctuating market cycles, loss of a large customer, and your competition. Unforeseen demands and its effect on your business all need to be factored in.
  • There is nothing wrong with putting together a contingency plans just in case of unexpected events. It’s true that market leaders manage uncertainty much better than in years past, but you really should have risk management procedures for your company as insurance. Base it on both an objective and realistic view of how working capital is used in your business.
  • There is definitely an advantage to addressing working capital on a corporate-wide basis. The cash you generate at one business location is often times better used at another provided one is more profitable than another. However, for this type of internal business exchange to work you must have certain practices already in place. Your business better have efficient banking channels and an open line of communication between production and billing as well as an internal systems to move cash to and from the locations.
  • A new and different approach can be used to make use of the combination of operational and financial skills provides an encompassing outlook of your business’s overall operations. It also has shown to improve the identifying and implementing strategies used to generate short term cash. Only businesses with executives willing to personally define targets and performance levels make this happen. They need to be held accountable for delivering what they promise as well as pushing everything into motion as agents of change.
  • As a business owner, you need procedures in place that properly deal with dispute management. You want your customers to basically go away during disputes and free up that locked up cash. Not only that but it can also improve your overall customer service by using that energy towards sales, order entry, and cash collection. You’ll be pleasantly surprised how much of an increase you’ll see in your business’s efficiency on top of a reduction in operating costs.
  • Contact a few of your best customers and ask them what can be done to improve your operations. Many businesses tend to focus solely from their point of view instead of seeing how others perceive it. One recent study showed that by listening to their customers, a wholesale company saved a great deal of money through inventory reduction levels.