Irrespective of an organisation’s magnitude and industry sector, working capital is an essential metric in evaluating the long-term financial health of the business.
In a report by PWC in 2021, around 65% of the executives revealed that managing working capital is the primary objective of reconstructing and changing management activities. In this regard, opting for a working capital loan can be an ideal option that ensures hassle-free functioning of businesses, recruiting better resources, paying salaries on time, etc.
Tips for managing working capital for a small business
Here are some effective tips for managing working capital with a working capital loan:
Tip 1: Efficient management of inventory
A well-organised inventory can improve working capital. A substantial working capital calculation can be achieved by minimising slow-moving inventory, avoiding stock-piling, increasing inventory turnover, etc. Besides, a large inventory can consume a considerable chunk of working capital, thereby mounting the assets. However, these assets can become liabilities if the stock is not cleared early.
One way to manage inventory is dealing in consignment stock, where the stock must be sold after payment. Another one is efficient forecasting, where one needs to evaluate how much working capital does his/her business need to ensure savings and avoid over-ordering than what is required.
Tip 2: Timely payments and vendor management
Implementing payment discipline is an essential part of the payment process. By availing working capital loans, business owners can improve their payable performance and minimize the days payable outstanding. Thus, to minimize bad debts, one must implement rigorous credit checks and ensure proper placement of credit control processes.
Tip 3: Securing the right credit option
Acquiring a working capital loan to improve working capabilities is achieved by owning adequate liquidity to fund existing operations without taking much risk. Assessing working capital KPIs and understanding working capital requirements will allow an enterprise to select accurate financing solutions and sufficient funds for anticipated operational needs.
Along with a short-term business loan, business owners can also choose to finance steady assets with long-term credit to maintain healthy cash flow. Using such cash flow to pay the suppliers, fulfil purchase orders, etc., can allow business owners to maintain a healthy relationship with vendors, thereby enabling them to secure discounts, improve cash return on asset investment, etc.
Now that business owners know the tips to manage working capital and why working capital finance is necessary for small businesses, they must follow the guide to meet urgent costs and boost their SMEs.
In this regard, borrowers can approach leading creditors like Bajaj Finserv, to avail working capital or business loans at affordable interest rates along with a range of benefits. They also provide pre-approved offers on a wide range of financial products, such as personal loans, business loans, credit cards, etc. Existing borrowers can check their pre-approved offers by mentioning their names and contact information.
Acquiring a working capital loan for maintaining the cash flow in the business will increase efficiency, generate profit and ensure significant growth. One must make the right decisions regarding this to have