If you are worried about working capital of your business going for a toss, here are some tips one can follow to improve the same. These tips will help in the smooth functioning of the business to a great extent. A good working capital helps in the smooth functioning of the business. But often due to the increase in current liabilities and expenses over the current assets, the day-to-day operations of the business go for a toss. Hence, it becomes difficult to increase the operating profit of the business, which is most crucial for running the trade well. Below are the points, which will help in increasing the working capital of the business. Invest your operating profit to cover your short-term liabilities
The WC is used mainly for the short-term investments of the company. Therefore, it is advisable not to exhaust it completely in the long-term investment like purchasing of machinery or equipment. Instead, lending or renting the machinery shall be considered. Choose the right kind of asset financing The different kinds of financial institutions provide a variety of financing, be it accounts, inventory or working capital. It’s a short term financing which can be used to support the day-to-day operations or can be used to cover the funds that are stuck in account receivables. Increasing inventory turnover ratio Reducing the storage expense of the inventory and slowing down the manufacturing of the goods can increase WC. Smartly negotiate with suppliers Considering the chain effect as your customers negotiate with you, which reduces your profit margins. In order to improve on that, it is required to smartly negotiate with the suppliers. Look for government support As startups are the need of the hour, supporting SMEs is currently a priority sector for the government. Hence, one can explore availing working capital support from government institutions at a much competitive rate.
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AuthorAman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management. |