Looking to better manage your cash flow and working capital?

Efficient cash management is necessary for the survival of any business. It helps business owners to understand the inflow and outflow of money as income and expenses. It helps in making important investment decisions for the growth of the business. It is vital for SMEs and startups especially, to keep their business running in these competitive markets.

Working capital is one of the components of cash flows in the cash flow statement. It is the difference between the current assets and current liabilities of the business. It measures a firm's ability to meet its short-term obligations. Without adequate working capital, a business will not have sufficient cash for its day-to-day operations and growth.

Tackle your cash flow and working capital with some of the tips given below:

1. Everyone must focus on working capital: Business owners often think of working capital as work associated with the finance team. They must have KPIs for working capital that is understandable by the management team. It is important for everyone to be aware of KPIs and know-how and why it is necessary to manage working capital.
2. Manage accounts payable on time: Oblige your A/P on time. Thinking how it will help in improving cash flow? When you pay suppliers on time, you don’t have to chase invoices, it will help in getting flexibility in prices and business terms. You can effectively negotiate with suppliers and can charge a particular person for maintaining a healthy business relationship
3. Don’t tie too much fund on stocks: Excessive stock holdings block a substantial amount of capital. Overbuying of stock can be avoided by monthly or quarterly stock checking. But one must also ensure there is no shortage. Thus, one needs to maintain the balance between excessive and shortage concerns.
4. Leverage assets for financing: Businesses can secure long-term finances against the assets such as plants and equipment etc. This will help in securing the additional financial needs of the company. Businesses can also leverage whether they want to make a quick repayment to reduce the total interest or the number of years to reduce monthly payments.
5. Opt for invoice factoring and discounting: It helps you to release your cash from the accounts receivable. It enables you to borrow up to 85% of the value of the invoices. It helps to meet the cash requirements of the business.
6. Control your expenses: It is important to monitor the expenses, as it affects the working capital of the business. Businesses set rules for certain expense categories such as travel and entertainment. The introduction of the corporate card will also help to regulate the employee expenses of the company.

Still, struggling with cash flow and working capital?

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Accounts Junction is backed by a dedicated team of professional experts of CPA, CA, and accountants and the latest cloud technology to help our clients to focus more on business while leaving accounting to us.

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