Working capital is what lets businesses take care of their expenses on a day-to-day basis. If you’re wondering about ways to boost your working capital, just keep reading for several proven strategies.
Negotiate with Suppliers
The terms suppliers provide can have a big impact on your working capital. It is worthwhile to periodically revisit terms with suppliers so that you can negotiate better prices. If a supplier is unwilling to negotiate, don’t hesitate to move on to a different one.
Work on Accounts Receivable
Collecting accounts receivable is an essential part of bringing money into your business. To improve this part of your company, accounting expert Dennis Najjar recommends these tips, among others:
- Prioritize accurate customer data collection. Errors like incorrect addresses can cause late payments.
- Outline clear procedures for payment-collection efforts.
- If a customer is consistently late in paying, consider shortening their payment window.
- Implement a resolution process for billing disputes.
- With software, automate as many operations as possible.
Keep Taxes in Mind
Taxes can cut into your working capital, especially if your business isn’t taking advantage of all the tax breaks it can. Make sure that your business is well-positioned when it comes to taxes. This needs to be an ongoing, regular process because the tax code continually changes.
Analyze Ongoing Expenses
Your company should regularly review its ongoing expenses and eliminate any that are unnecessary. For example, canceling unneeded subscriptions is an easy way to eliminate a repeated expense. The same goes for looking for ways to cut down on utility costs, such as turning off the lights when no one is using your company’s office space.
Pay Attention to Credit Risk
Some customers are much less likely to pay on time than others. Analyze your customers to see which ones are less creditworthy, then incentivize or penalize them to make them worth the risk. In truly bad cases, you may need to cut ties to protect your working capital.
Looking for more business tips? Be sure to check out Whitefish Funding’s other blog posts.