6 Tips for Improving Your Business Working Capital
Running a tight ship when it comes to your business is all about understanding your working capital. However, managing yours wisely isn’t just about cutting back on expenses and saving where you can. It’s also about knowing where and when to spend money. The following tips can help you master the entire process.
- Negotiate With Business Partners
Never simply settle for the price a supplier offers you and call it a day. Always negotiate for better pricing and better overall terms. Even small discounts can add up to big money after all is said and done, especially over time.
- Finetune Your Payment Terms
Supply prices aren’t the only expenses that can benefit from a little expert haggling. Give your working capital a much-needed boost by taking a closer look at the terms and schedules associated with your accounts payable department. There may well be a way to rearrange things that’s a lot easier on your ongoing cash flow.
- Step Up Collections
Some clients are absolute dreams to work with and for, as they always pay their invoices on time. Others need a little incentive to stay up to date, and motivation can work wonders. Encourage clients to pay on time (or early) by offering desirable rewards for doing so. Make sure your collections team is similarly motivated to deliver results.
- Cut Back on Expenses
This may seem like the most obvious way to improve a business’s bottom line, but it’s no less important for that. Look into whether your company could easily save on necessary but variable expenses like upgradable tech, office supplies, space rentals, and more.
- Take Advantage of Tax Breaks
Have your accountant look into whether or not your company is taking full advantage of any tax breaks you might qualify for. Have them keep an eye on your tax situation going forward as well to ensure you’re always in a position to save as much as possible.
- Pay Attention to Credit Risk
It literally pays to segment your client roster according to how risky each person or entity is from a credit standpoint, as you can save quite a bit on collection efforts. You’ll want to keep a close eye on distributors as well. If some seem more likely to sell to risky clients than others, implement an education program that can help them make better judgment calls going forward. The health of your working capital will definitely thank you for it!