When you understand the different ways to increase the working capital for your companies, it is sure that your company will grow for now and in the future. Here are the most common practices for your business to enhance the working capital.

1. Shorter Operating Cycle: As soon as you start spending the money on a project your operating cycle begins. The operating cycle will end as soon as you receive the payment. It is essential to limit the time between the cycle. It would stagger your earnings and damage your cash flow if you wait weeks to deliver your invoices. You may request the payments within 15 – 60 days depending on your industry. Try to minimize the time between project competition and send an invoice. If the cycle is long it can translate to lost income and poor liquidity.
2. Credit Checks: If any of your customers have a bad credit score it will have a direct impact on your receivable account. Depending on the scope of the order you will have to run a credit check before signing the deal so that there will be no issues later. You should consider low credit limits for your new customers.
3. Collect Outstanding Invoices On Time: Make sure your accounting department monitors all the past due accounts and take the appropriate measure if payments are delayed beyond the given time frame. Uncovering any complications that can keep the customer from making their purchase is critical. Reminders will help speed up the process of collecting invoices. Make sure you don’t wait until the last date; it will make the process slower.
4. Limit The Expenses: Make sure there is transparency in the money spent. You will have to examine the budget and do not overspend in any areas of your business. Make sure to strictly follow the budget and restrict any unnecessary expenditure. Examine the expenses of the business trips if any and free some capital. Focus on the functionality of the company. Small amounts spent in the unnecessary expenditure could be used to enhance your working capital.
5. Increase Sales Revenue: This will increase your funds and this will increase your revenues. Focus on exceeding the sales and explore the new market channels. Make sure your rates are reasonable depending on your pricing of profits and sales. Profits on revenues may not come in time depending on the business cycles, In this case, don’t forget to work on decreasing your costs.
6. Avoid Stockpiling: Every unsold item in your warehouse is a pile of money that cannot be put to use. This decrease in liquidity will make your business less competitive. Focus on maximation of the cash flows. Manage the time of your supplies to arrive exactly when you need them instead of hoarding them in your warehouse. By converting inventory into your cash you will have less capital that is tied up. Another major benefit of avoiding stockpiling is that you will need less space for storage that can cut down some additional costs.
7. Lease Your Equipment: Technology advancements are increasing day by day and hence technology gets discarded every few years. These days it is unwise to invest in every piece of equipment. If you want to stay on top of the technological advancements then leasing is the best option for you. Leasing is one of the best options for cash flow management. You can also make use of your assets to improve your working capital by lending out the equipment that you don’t use anymore. You can sell it to the leasing company to get that one-time cash boost. In case you need that equipment later you can lease it back from where you lend it. Many business owners often avoid the unused office space that can be used as a source of revenue. Just like you can lend the equipment you can sell or rent the extra office space that will liquidate the long term assets.
8. Leverage Your Account Payables: Many organizations often overlook the importance of a good relationship with their creditors. The major key to this is to maintain a good credit score. You can easily negotiate the extended payment terms if you have a good credit score and a good relationship with your creditors. Though this is not the permanent solution to the financial issues this may help to some extent. While you may try to obtain your receivable accounts as soon as you can, your payable accounts can be postponed as much as possible. You can practice the invoice financing to ensure that you get the cash as per your terms. When you work with the vendors make sure to check for the discounts and negotiable payment terms once you become a loyal customer.

By following these practices you should have a better understanding of the options available when it comes to optimization of your working capital. Your business would have the resources it wants to be competitive by prudent investment, mindful selection, and making the best of the available funds. It is important to be prepared for all the recessionary Crises when companies can face major challenges in funding the business operations. As these incidents arise, more firms decide to slash discretionary and capital budgets and also seek decreases in capability, closures of stores and services, and layoffs. Companies should bear in mind that there are options available for improving working capital that does not require access to credit or another financing.

Best on the studies Here is the basic call to action for the organizations that intend on strengthening the working capital management capabilities.

1. Align the management process of working capital with the corporate strategy, centralize the processing of financial transactions, cultivate cross-functional engagement, and provide sufficient support at the executive level.
2. Identify the relevant drivers of the importance and uncertainties of working capital management and then use these drivers to build indicators that complement the particular features of the business model of the firm.
3. Commit to the ongoing development of working capital management practices by cross-functional collaboration.
4. Using supporting technologies to maximize performance and promote associated process changes until the working capital management plan and procedures are in place.

Legalraasta helps its customers achieve an effective place of working capital and promotes cash release to finance additional growth initiatives. Robust structures, streamlined procedures, and strict management of costs and controls resulting in the release of cash are included in a successful working capital management program. By reducing float in various finance processes and developing structures for efficient cash forecasting, we help customers boost their cash operating cycles.

So, what’s in it for you?

• Facilitate extra development with current working capital
• Optimization of cash from the company
• Procurement, payable accounts, inventory, and enhancement of collection processes
• Reducing exposure to debt and managing capital costs
• Highly admirable and information reliability and continuous control establishment.