Know About Working Capital To Manage Your Business Well

The day-to-day management of the business of its short-term assets and liabilities is called working capital. Also It is important to understand GST impact on small businesses. Managing it is a critical aspect of every business which ensures its continued progress. ​

​The simplistic formula for calculation of working capital is current assets minus current liabilities. Well, there are several determinants to working capital such as -

• Cash and Cash Equivalents - it helps to determine a firm’s liquid asset balance.
• Inventory - this involves the costs in hand for the company such as the cost of maintenance, storage, damage to inventory and so on.
• Debtors and Creditors– Debtors are payments that the company will receive for goods or services it provides. Whereas, creditors constitute the suppliers it needs to pay for the purchase of raw material or other services from vendors.  A balance between these two is what working capital evaluates.

In order to manage the working capital of your firm here’s what you can do -
Create a meticulous inventory list and optimally manage them. Additionally, you can look into consignment stock dealing to know where the stock is to help know its buying and selling and for better assessment. Forecasting inventory will ensure that the business manages its current stock well and does not order more than what is needed.

Moreover, an effective management of your business inventory will result in flexible and scalable financing. For instance, business loan from leading NBFCs is available with the Flexi Loan facility. This is a unique feature which lets you withdraw as per your business needs. This practice, in turn, synchronizes well with the requirement of inventory and avoids unnecessary accumulation of debts.

Maintain healthy credit terms which is a measure of your businesses credit worthiness. This is imperative to maintain the balance in the working capital too. As a healthy relationship with vendors, suppliers, dealers can lead to flexibility in business dealings. For instance, as Flexi Loan facility charges interest only on the amount withdrawn it helps to comfortably maintain a healthy cash flow and keeps the lending costs low.

​For Everything you Need to Know about Working Capital Management, read here:
https://www.egyptobserver.com/everything-about-working-capital-management/