A steady flow of working capital not only allows you to steer your business towards growth, but also ensures that daily operations may be carried out without a hitch. It is the key component towards building business agility, allowing your firm to capitalise on new opportunities and build credibility amongst your employees and vendors.
While you may already know that working capital is your operating cost when you compute the difference between your assets and liabilities, this figure can be changed by putting some smart strategies into place. Here are 5 easy ways you can look to increasing your working capital and boost your business.
Rethink how your fixed assets are financed
When your finance large fixed assets like industrial machinery or your factory shed and land with working capital upfront, you risk a shortage. Instead, pay in instalments if you can lease or rent the equipment or property, or take an affordable Loan against Property or Machinery Loan that you can service over time. This way your working capital can fuel more pressing costs, and contribute to immediate generation of revenue.
Reduce your invoicing and operating cycle
The next big aspect to focus on is making your accounts receivables more efficient. There are several ways you can strengthen it:
- Don’t wait under the end of the month to bill your clients; send the invoice when you have finished the work
- Ask for 50% advance payment before you start working
- Reduce your operating cycle between when you start work and when you finally receive payments by using machines, better delivery services, more ways of receiving online and offline payments, etc.
- Reduce the time taken to create invoices by tracking work done more efficiently
- Offer incentives to customers who pay early or on time
- Check the credit rating of new clients before starting work to reduce chances of non-payment
Boost sales and decrease inventory
The next sure-fire way of increasing working capital is increasing your revenue. This can happen when you manage your inventory better, so that you don’t have stockpiling issues or run out of raw material when needed. You can use inventory management software for this, and also work with vendors who offer discounts to save on costs. Secondly, boost sales with the right marketing plan, upselling to your existing clients, hiring more experienced salesforce, venturing online, tying up with a partner firm, or participating in trade shows and exhibitions.
Decrease production costs and other redundant expenses
Every quarter, analyse your firm’s cost of production or offering a particular service to see if you can reduce them. From faster software to updated machines, from skilled talent to a cheaper office space, you will be able to find key variables that can help you decrease costs when you look closely. Streamlining your supply chain, outsourcing a part of your packaging or production, and reducing marketing expenses that are not generating any leads can help you run a tight ship and thus save more funds that may be channelled towards working capital.
Take a flexible Working Capital Loan
To facilitate growth and diversification, you can rely on an affordable Working Capital Loan that will keep your cash flow strong such as the one offered by Bajaj Finserv. With simple eligibility criteria created for SMEs, this loan is easy to apply for and offers up to Rs.30 lakh which you can repay in up to 60 months. One way in which this loan offers more flexibility is via its Flexi Loan facility. It allows you to borrow multiple times from the sanction and pay interest only on the amount you actually use.
This gives you access to funds when you need them without adding to your cost. Additionally, you can make part-prepayments when you have the funds to do so, and even redraw the prepaid amount. You can also pay interest-only EMIs and repay the principal at the end of the tenor to reduce your EMIs by up to 45%. This will help you pay off the principal when you have received payments from customers and enjoy better cash flow. Make the most of this facility and get instant approval on a deal customised for you by checking your pre-approved offer today!
With these 5 tips, you can boost your working capital and see immediate results when it comes to business growth.
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