For a firm’s day to day functioning with procurement, payments, and supply-demand; working capital is a vital element. Hence, it becomes a prime objective for the companies to constantly keep innovating upon strategies in order to improve their working capital position while monitoring their cash flow. Here are few points that can be kept in mind while managing the working capital:
Incentives on receivables: Incentivizing loyal and punctual customers prevent accounts from aging. Ceasing the business transactions with defaulters would turn out to be a great advantage for the firms. This also defines that a firm needs to ensure the payment of debt obligations and this can be done by deploying electronic systems for the same.
Prefer discounts and cost reduction: Vendor discounts save upon finances; hence, it is important to maintain long-lasting relationships with them. In case of cash crunches, this relationship offers leniency. Determining the reduction of fixed and variable costs, identifies wasteful expenses, the elimination of which working capital gets more liquidity.
Examine: Scrutinize the loan interests and debts to acknowledge if modifications in interest rates are possible. Working capital can elevate when loan clearings reduce future installments. Also, make sure to maintain fluidity in warehouse inventory and examine any goods that undermine performance.
Operational precision: Automating business processes like accounts receivable and payment scrutiny save a great deal on streamlining procedures. Staying updated with crucial financial information and keeps revamping the database. Resolving issues with parties like vendors and customers are required to be resolved at the earliest, in negligence of which unnecessary legal expenses are added.
Identify opportunities: Constant improvements on the working capital position ensure higher profits by stock issue, selling assets and taking debts, however, it should be involved only as last resorts. Putting tax incentives to advantage subsequently channels into working capital funds.
Maintaining and amending the working capital procedures and better management of cash flows is important and this is where Hvantage Technologies step in because we understand your business like no one else does.