The current introduction of the RBI Guidelines on the Loan Supply Scheme aims to accelerate much better assessment of working capital needs by borrowers. Subsequently, a business will be able to inculcate better financial discipline.
While this move will be followed by close monitoring of liquidity, the policy of reputed lenders who provide WC loans will have a vital significance.
This step will encourage enhanced WC planning by corporates, whereby they will be able to align their limits to their cash conversion cycle.
Such endeavours ensure a new approach to boost the gross working capital of a business. Consequently, to encourage the smooth functioning of a business, here are a few tips to manage the business capital –
Tip 1: Improve the receivables process
For businesses to achieve more success, it is imperative to maintain a precise debtor’s ledger that assures your priority in the debt-collection date list. Ensuring this, you can send timely reminders of your payment to the client in question.
It requires companies to reassess their working capital needs, invoice process and eliminate any inefficiency that may lead to delays in sending invoices to the debtors.
You can also opt for electronic invoice delivery to quicken up the collection and billing. It leads to a shorter cash conversion cycle.
Tip 2: Pay the suppliers on time
Payment discipline is an essential part of a business’ payable process and an improvement in the same is only feasible with –
- Reduced days in outstanding payables.
- Boosted payable performance.
This counter-intuitive process to stabilise the working capital of a company financially safeguards it in the long-run. With timely payment to suppliers comes leverages in the form of –
- Negotiable deals.
- Discounts on purchases.
Tip 3: Channelize and control your expenses
Keeping track of expenses is a mandate considering that often small expenses can become a substantial financial burden. Consequently, it can have a negative impact on a business’s working capital.
It requires entrepreneurs too –
- Calculate working capital requirement for your business.
2. Evaluate the shortcomings and strength of a company.
3. Invest accordingly after a careful measure of cash inflow and outgoing amount.
Tip 4: Manage inventory and e-procurement
a) Inventory
Accurate inventory management is essential to make the most of the available gross working capital. Along this line, entrepreneurs need to take into account two cases –
Case I – Excessive stocks: Strains a business with an uncalled-for burden on the cash resources of a business.
Case II – Insufficient inventory: Results in damages and lost sales to customer relations.
Thus, maintaining the optimum inventory can easily be managed considering that there is –
- Enhanced communication between demand,
- Focus on the anticipated demand,
- Driven up costs for insurance and physical storage.
b) E-procurement
Investing in procurement automation techniques and solutions are the ideal way to track down the purchases.
It is a rigorous authorisation process that takes into account the centralised and streamlined purchase process.
It prevents the maverick spending process and ensures that e-procurement has the permit to order only approved merchandise or service from the company-preferred vendors.
Tip 5: Arrange for alternative funding options
While the tips mentioned above are centred on the smart handling of business, you can also opt to avail financial assistance from reputed NBFCs in the market. It ensures that your WC requirements are well-met sans straining your budget.
In this regard, you can avail Business Loan from leading lenders like Bajaj Finserv to ensure that your working capital needs are financially covered.
The financial company also brings its pre-approved offers that ease the application process to avail financing.
A comprehensive understanding of working capital, coupled with the tips mentioned above to manage the same, is sure to set off the success rate of a business.
Do make sure to follow up with a timely update of the available and required working capital and decide the course of your investment accordingly.
