Your cash management practices determine if your business will thrive or become insolvent. Statistics show that 82% of small businesses failure results from cash flow mismanagement.
You need enough working capital to fund your daily operations and finance your business’ growth needs. However, if you are not careful about spending your working capital, you may lack the cash needed for short-term and long-term expenditures, leading to insolvency. Here are tips to managing working capital to ensure your business thrives:
Train Your Employees on Cash Flow Management
Cash flow management is not a preserve of the finance department. Train all your employees to understand their role in maintaining a good cash flow. In addition, develop key performance indicators (KPIs) to monitor cash flow in your company.
Ensure everybody understands these KPIs. Use the data you generate from your cash flow monitoring tools to take remedial actions for better working capital management.
Small expenses can build up significantly and affect the working capital for your business. Control expenditures by introducing expenditure monitoring systems, such as a corporate card, to understand where your cash is going.
Identify unnecessary expenditures like travel and entertainment and reduce or eliminate them. Take remedial action on workers flouting cash management rules.
Manage Your Inventory Effectively
Overstocking holds your working capital, leaving you with little or nothing to spend on daily expenditures. If you understock, you risk running out of stock frequently. Monitor your inventory regularly to determine the best time to purchase more stock.
When you establish optimum stock levels, you reduce the cost of insurance and physical storage. You can also avoid wastage of time-sensitive items when you balance what you purchase and sell.
You can carry out quarterly or monthly stock checks and follow up with appropriate remedial actions. Ensure there is effective communication between departments to avoid overbuying or stock shortages. This way, they can do better forecasting of stock needs for optimum working capital management.
For better stock monitoring, invest in procurement automation technology. The technology can manage your inventory to ensure there is proper authorization for each purchase. It also helps you procure approved products from preferred vendors at all times.
Introduce Electronic Payments Processes
Electronic payment eliminates errors and reduces the turnaround time for your transactions. You can generate and share invoices electronically, helping you to monitor your accounts more efficiently, reduce lost invoices and the volume of invoices you manage at a time.
E-payments require multiple authorizations. This can protect your working capital and reduce unexpected expenditures. It can also help you get favorable payment terms that contribute to your working capital conserving efforts.
Strengthen Your Credit Control
Give your debtors a repayment window that does not hurt your cash flow. If you give them a big window, they hold up your cash and leave you struggling to meet your short-term expenditures.
A big payment window can also significantly increase your bad debts and impact your company’s cash flow. Put in place rigorous mechanisms for chasing late-paying debtors.
Additionally, reassess your credit terms and contracts to align them to your business’s cash flow needs. Mail invoices as soon as possible and indicate when the payments are due. Send reminders to unresponsive debtors to reduce the delays in invoice clearance.
Pay Your Vendors on Time
You may think delaying to pay your suppliers increases your working capital, but that is not the case. When you pay vendors on time, they gain confidence in you and may willingly extend credit to your business. They may also help you increase your working capital when they give you better business terms and discounts, especially when you do bulk buying.
Delaying paying your suppliers gives you a false hope that your cash flow is healthy. When the vendors demand their payments, you may not have the cash to clear their invoices, causing unnecessary conflicts that may hurt your relationships.
Get Adequate Financing
Your working capital changes monitoring tools will indicate your working capital needs. Use the information to determine the right fund size for your short-term and long-term operational needs.
Consider taking an SBA 504 loan for your long-term and fixed financing to spur the growth of your business. Your SBA loan can provide the cash you need to run your business and finance your business expansion strategies.
You may find reputable financiers like Business Finance Capital (BFC) that offer clear, simple, and affordable requirements for SBA loans. You can easily qualify for your SBA loan as the SBA guarantees a portion of your loan.
504 SBA loans are affordable as you can repay them for up to 20 years. This allows you to get a large loan amount of up to 90% of your project’s total cost. Besides, the 504 SBA interest rates are fixed and usually below market rates, helping you budget for your monthly repayment installments.
Talk to a Reliable Financier
If you are a part of the California business community, Business Finance Capital (BFC) is your best bet for working capital financing. At BFC, we offer a variety of small business loans to spur business growth.
Our requirements for SBA loans are within every business reach as we make our funding affordable and simplify the application process. Our trained and responsive Underwriting officers will walk you through the process to ensure your application is successful and fast.
BFC requires minimal documentation for their 504 SBA loan. We also ensure quick disbursal of the funds to ensure cash shortages do not interrupt your business processes.
With our proven record of accomplishments working with small, mid-size, and large organizations, we will help you implement your business expansion strategies. We will provide you with low long-term fixed rates to make your dreams for your business come true.
Whether you are looking for your first SBA 504 loan or you want to refinance, we have what it takes to help your business become a roaring success. We guarantee you the highest level of integrity, quality, and customer satisfaction.
With over 20 years of experience in SBA lending in the USA, you can count on our expertise in the industry. Contact us to discuss your 504 SBA loan eligibility.