Tips for Managing Your Business Working Capital Better

Working Capital Tips

You want to make a purchase or fund a plan that may positively impact the way you do business, but there is one hitch; you have a problem with your working capital. Lacking this important asset can seem like having shackles on your wrists when you want to make an important move that will affect the future of your business. Maintaining working capital is essential for any company, and neglecting this important factor may mean the difference between having the ability to invest for success and letting an important opportunity pass you by.

Working capital is the difference between your assets and liabilities in the short-term. It affects your money supply and ability to secure things your business needs. While the goal is to increase revenues and cash flow from your company’s operations, taking long-term debt to secure short-term funds can be one strategy. Here are some other tips.

  1. Make Timely Payments

Don’t get behind in things you owe, but pay right away, or at least as soon as you can. There are few things more discouraging than thinking you have more available capital than you do until you remember an outstanding expense. Paying things off on time is also good for your credit.

  1. Cut Costs

Make sure that you are streamlining the costs of doing business by keeping detailed records of expenses and making sure that your available funds are being used efficiently. Use apps and software to facilitate comparison shopping for different services to find the lowest prices.

  1. Use Your Assets for Financing

Finding long-term, low-interest financing is an effective strategy for securing more working capital. Anticipate the need for available funds before you really need them to avoid the desperation factor that may lead to hasty decisions. Talk to different lenders about rates and policies to find the best terms. Asset based lending is a loan against property, and often offers lower interest rates and a longer repayment period than other kinds of loans.

  1. Consider Invoice Factoring for Working Capital

Borrowing against outstanding invoices can be an effective way to increase working capital if you need it promptly. If you have strong credit and clients who also have a clean credit record and a long-term relationship with your company, you may be able to borrow against as much as 80% of your future invoices. If your business is established and is in good standing, this improves your chances of taking a loan against payments you expect to receive from your clients.

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