4 Ways To Improve Business Working Capital
Every business needs positive cash flow. The more cash on hand, the more flexibility the company has in reaching its goals. There are multiple ways to boost business working capital, and the more ways you do so, the more powerful of solutions you’ll have for managing your business. While a business loan can shore up a variety of situations, there are also a few in-house methods that can be taken to reduce how much you are spending and gain more financial freedom.
1) Sell unnecessary or unwanted equipment
Look around. How much equipment or other unused supplies does your organization have? The more money you spend on these assets to upgrade them, modify them, or otherwise transfer them, the more money you have tied up. Sell unnecessary equipment to free up that cash. There’s likely a large, open market for these items.
2) Pay suppliers on time
The fees you pay for being late on payments cost you big time. Just a small five or ten percent means that you are shelling out much of your business’s working capital and potential profits. Avoid getting caught up financially to ensure you can consistently pay vendors, suppliers, and others on time.
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3) Lease instead of buy
When you lease your equipment, you preserve your working capital. This provides you with more cash flow every day while also keeping your out of pocket costs in line with your goals. By leasing, you keep your working capital free from being locked into an asset that’s not liquid.
4) Reduce fixed costs
Go through your profit and loss statements and look for specific areas of opportunity. Can you negotiate a lower rate on your rental costs? How about your utilities? Can changing your procedures or methods help to cut these costs even 5 to 10 percent lower? Consider insurance, operating expenses of all types, the vendors you use, and even the current loans you have in place!
The Bottom Line
Each of these aspects plays an important role in helping your business to thrive. Freeing up working capital can seem like a challenge, but when you look at your costs on a line by line basis, you’ll see more evidence for potential savings. All of that contributes to your bottom line!
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