“Show me the money,” said actor Tom Cruise in the 1996 movie “Jerry Maguire.” Every business today says the same thing. Cash or working capital is the fluid that keeps the wheels of business turning every day. Having money available to pay for daily operations and even emergencies is essential for business success.
What is Working Capital?
It is essentially the cash that you have available to spend on the operations of the business. Managing working capital includes all the actions involved in collecting revenue, managing inventory, paying suppliers, and managing debt—the key things that keep your business running.
How Does Working Capital Management Impact My Business?
Consider the following aspects as essential to your company’s financial health and success:
- You need to have cash and be financially solvent to pay for operating costs.
- Being able to pay bills and resolve debts in a timely way enables your business to have a good credit score and to secure future financing.
- Available cash facilitates business expansion and growing profits.
- Proper funds management means that you can have capital on-hand for emergencies.
7 Tips for Managing Working Capital
- Reduce your receivables cycle to get money in as quickly as possible. That involves prompt and accurate billing and even incentivizing prompt payment from your customers.
- Manage vendor payments in a disciplined way. Prompt payment leads to good relationships with suppliers and more favorable purchase and payment terms. Negotiate the most favorable payment terms that you can.
- Manage purchases and inventory so that you don’t have excessive stocks or extra storage payments and so that you don’t have to pay for rush deliveries.
- Budget funds carefully and follow your budget. Avoid spur-of-the-moment spending decisions.
- Work well with your bank to optimize funding sources, trade finance and credit terms.
- Review financial data carefully to know the state of your business.
- Expand your resources by choosing financial experts to assist you.
Get Expert Assistance
Contact Capital Connex Business Solutions to secure expert financial advice and funding solutions for your business needs: https://capital-connex.com/