Growth is essential for any business, and one of the most critical factors in achieving this growth is having enough working capital. Working capital is a business’s money available to cover its short-term expenses, such as payroll and inventory. With sufficient working capital, companies can meet their financial obligations, and even explore new markets or product line expansions which may otherwise be out of reach.
As we dig into ways to increase working capital in the business, we will discuss several strategies businesses can use to increase their cash flow and accelerate business growth in 2023.
Reduce overall expenses:
By cutting costs wherever possible, businesses can free up more funds for working capital needs. This could include renegotiating contracts with suppliers or switching to more cost-effective vendors.
Shift to long-term liabilities:
Long-term liabilities such as loans or bonds can provide businesses with additional funds for working capital needs without paying them back immediately. While having a line of credit or loan for expansion may provide large cash infusions, the downside is the length of time and amount of time and effort for your business to be approved by a traditional bank loan.
Negotiate Payment Terms With Vendors:
Negotiating longer payment terms with suppliers can help businesses conserve cash flow and use it for other purposes, such as investing in inventory or expanding operations.
Accelerate accounts receivable collections:
By streamlining the accounts receivable process and collecting payments faster, businesses can access more cash on hand, which they can use for working capital needs. One way to do this without additional pressure on your clients is invoice factoring, which we’ll discuss in a moment.
Turn assets into cash:
Many businesses have assets they don’t need but could be converted into cash, such as equipment or real estate holdings. Selling or an asset-based loan using these assets could provide much-needed funds for working capital needs without taking out loans or other forms of financing.
Utilize invoice factoring services:
One of the fastest and simplest ways to raise capital, invoice factoring services allow businesses to sell their invoices at a discount in exchange for immediate access to funds that they can use for working capital needs such as payroll or inventory purchases.
Invest in technology:
Technology investments such as automation software or cloud computing solutions can help reduce operational costs while also increasing efficiency and productivity – freeing up more resources for working capital needs.
By employing the previous tips, your business will be well on its way to achieving faster growth through increased access to working capital. If you would like to speak to a working capital professional about your business needs and goals, we would love to hear from you and provide a right-fit solution for your business’ needs.