How to Control Your Business’s Working Capital
Having a continuous cash flow through your company is vital to its long-term success. Having money in your account after your expenses is what ensures that you can remodel areas that need updating or expand when your organization grows. Managing the working capital of your business strengthens the relationships with those you work with and keeps your facility running efficiently.
Reconcile Your Invoices Promptly
Collaborate with your accounts payable department to set up a schedule for the payment of invoices that come into your business from your vendors. Stress to them the importance that the bills are paid on time, possibly early in it can be managed. Doing this builds a strong relationship with those you work with to get the supplies you need to keep operating. Many companies will also give you a discount if you settle the account by a certain date. The cash that you save can go towards your working capital.
Observe Inventory Levels
Assemble reports of your sales from the past year as well as the production schedule from the same time period. Analyze what items sold the best and how many you have in stock. Use these numbers to predict how much of each product you should have on hand at any given period of time and what materials are needed to manufacture them. Be ready to cut back or purchase more if there is a change from the trends you are tracking. Managing your inventory in this way can be a challenge. However, if you can keep minimal stock on hand and adjust your assembly as your sales change, the money that you save can be put towards the working capital for your company.
Follow Up On Cash Owed To You
When a shipment is sent to your customer, ensure that the invoice for that order is mailed to them as well. For a quicker response, consider sending it by email instead of through the post office. If taking care of this in a timely manner is an issue for your company, have a meeting with your accounts receivable department and deliberate a method with them that assists them with this process. Consider purchasing software that makes inputting and printing the documents simpler for them. These members of your staff should also watch for payment and follow up if it is either late or absent. The money that settles these statements with your business will affect your working capital and therefore any improvements or expenses that you would like to handle for your organization.