By Zack Devin
Do you know the importance of having and controlling working capital for companies? In general, a company must be born, maintained, and grown according to cultivate advisors for small business. As your business idea is brilliant and the profit seems obvious, entrepreneuring without this financial resource is still tricky these days. Here are some tips for you to control and optimize working capital for your company.
Negotiate With Your Suppliers
It’s not pleasant to say this, but remember that it’s always worth considering that the accounts you owe may be delayed or delinquent. As a result, you also end up delaying your payments to suppliers. For this reason, always try to negotiate longer terms than your customers to avoid fines and interest on your accounts.
Parcel Your Purchases
In the same way that many of your customers will opt for payment in installments, consider paying their purchases in installments, even if there is cash on hand to buy in cash — as long as this operation does not involve payment of interest.
In this way, you do not compromise the working capital with short- and medium-term expenses and can avail the money in cash to pay the bills that cannot be paid in installments.
Cash Sale
In many cases, you will need to give time to your customers and offer installment options, but do your best to sell in cash. One solution to ensure that the customer chooses this type of payment is to offer financial discounts to those who pay in cash — which can be economically justified, i.e., the value is already included in the price.
Seek Process Improvement
Production costs and product manufacturing deadlines directly impact the company’s cash and working capital. Seek maximum efficiency in production processes, always aiming for shorter deadlines and less invested resources.
But be careful that this does not affect the quality of the products or employees’ satisfaction, so that the result is not just the opposite.
Prioritize Quick Sales
Generally, companies have that product that is their flagship, that is, that generates revenue faster than others. The tip is to invest in efforts to highlight items that come out faster, which increases working capital.
Know Your Cash Flow Well
This is a valuable tip from cultivate advisors for small business, as by looking at your cash flow, you can spot potential failures and identify why there’s no money left or what kind of expense can be reduced or cut. Try to work with a projected cash flow, which means an adequate projection of future payments and receipts flow to obtain greater financial discipline and less risk.
