Business owners that focus on many financial statements ensure their company’s health. One of the most important factors to examine is your working capital. This real-time number is the difference between your assets and liabilities. It is the money you use to pay short-term obligations, such as advertising, payroll and rent. Here are some ways to help improve your available capital.
You can increase sales with short-term price decreases, but that may impact your profitability and won’t positively affect your business capital. Develop a strategic plan that attracts new customers. Analyze your potential return on investment to make sure this is profitable.
Work with a lender to consolidate loans into one loan with a lower interest rate. Not only do you save money on interest payments, but also on bookkeeping expenses associated with managing multiple loans. If you have been repairing your credit score, consolidate debt and take advantage of those efforts.
Avoid Interest Payments
Control your credit card spending, especially if you are unable to pay the monthly balance. You may also consider eliminating loans approaching the end of their term. If there is no prepayment penalty, paying off those loans limit future working capital expenditures.
Review Company Expenses
Review each purchase that your company makes. Many business owners find themselves making purchases out of habit than necessity. While changing one type of paper for another or purchasing coffee in bulk won’t significantly impact your expenses, every little bit helps. It also gets you in the habit of questioning why buying decisions.
Encourage customers to pay their bills on time. You can offer discounts for early payment. Electronic Funds Transfers are excellent ways to get access to customer payments. Money is typically available the same or the next business day.
Look into establishing new relationships with vendors. Many business owners fail to release vendors that no longer meet their needs. Operating with a “business as normal” mentality may cost your company more than benefit it. Recruit new vendors to save money on everything from office supplies to raw materials.
Obtain a Loan
Some of the time, your working capital just needs a boost. Working with traditional or alternative lenders can help you infuse cash into your business. Consider a line of credit, invoice factoring, traditional loan or SBA loan.
Building a strong business requires that you manage your financial capital. With a few steps, you can increase your company’s profitability.