Working capital management allows you to keep your company’s financial fundamentals in check and leads the way for operational success. Effective working capital management is the hallmark of every successful business venture as it represents a synergy between the business goals, profitability and liquidity of the business.
As you know, working capital is the difference between the current assets and current liabilities of a business, and is utilized for running day to day business activities. Thus, working capital essentially represents the efficiency of your company’s operations and its financial stability in the short-run. If you don’t have enough working capital to cover your short-term debts and expenses, then your business may face operational or even existential trouble in near future.
Here are some pointers to further emphasis the need for having adequate working capital in your kitty.
- A business requires a bare minimum of cash-flow to maintain itself on daily basis. These cash requirements are fulfilled by working capital.
- Working capital is the key for debt and inventory management. If you cannot secure the inventory your customers are looking for then your business operations will suffer. Adequate working capital balance allows you to make emergency purchase of stock and services to keep your clients happy.
- Working capital may play and important role in your financial dealings such as applying for small business loans, mergers and partnerships.
- Not having enough working capital can ultimately lead to insolvency as your business will not be able to meet its debt obligations.
How to Manage Working Capital?
Working capital management is an accounting strategy. By making some financially prudent decisions, you can ensure that the balance between your assets and liabilities is maintained and you still have enough ready cash to fulfill your daily commitments. Here are some of the things you can do to effectively manage your working capital.
- Manage your inventory. When you are selling physical goods, a simple inventory management technique i.e. to balance your demand and supply can help you save more cash. Needless to say, this cash then becomes a part of your working capital.
- Prudent accounting can also ensure that you never run out of working capital resources. Once again keep a track of accounts payables and accounts receivables to keep your books up-to-date. Lagging behind in collections and payments often causes problems later on.
- Do a monthly analysis of your inventory turnover ratio and bill collection ratio to optimise your business operations and establish a cycle. This will help you in anticipating the expenses in advance and allow you to keep cash at hand when the need arises.
- Apply for a working capital loan. A short-term business loan is the easiest way to get ready cash for day to day operations. A working capital finance frees-up your capital for investment in equipment and site while you repay the loan amount in flexible monthly installments.
Lendingkart Small Business Loans
The thing that matters most when you apply for a business loan is the time it takes for processing and disbursement. Bank loans are cumbersome due to their inherently lengthy application, verification and disbursement processes. That’s why Lendingkart has kept the process quite simple by making it completely online.
You no longer have to Google all day about ‘how to apply for a small business online’. Simply create a Lendingkart account, fill in your loan requirements, and let us know about your business.
Once that is done, we will offer you a loan quote, choose to accept it and upload the documents for online verification. If all things check out, you can get a small business loan within 72 hours of application.
Ready to apply for a business loan with Lendingkart? Click here to proceed.