Every company in India requires a lot of focus on optimizing its working capital. With effective working capital management, every company can reduce its external funding while increasing its financial flexibility. The business requires a lot of funds for smoothly running the business operations.
It also effectively utilizes the working capital, so you have parity. It helps to gain maximum utilization and return on investment. It is possible only when the business wants to manage the various working capital elements proficiently. One must understand that current liabilities and assets are the two primary components of any working capital. Here are the five best strategies that help manage the working capital in India.
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Manage the inventory
Every business organization should properly manage its inventory to help in the proper management of the working capital.
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Cash management
Cash happens to be one of the liquid assets among all the current assets. Every business can convert its inventory and receivables into cash. The management of cash becomes highly crucial for the growth of the business. Every business needs to manage the cash for maintaining the working capital taken from Bajaj Finserv. The basic objectives behind this management include:
- Making payment during the due
- To minimize the idle cash.
A good business should look for a working capital demand loan to maintain the cash inflow.
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Manage the account receivables
Every business needs to sell its goods on credit for future business expansion. Account receivables happen to be the debtors that arise when you sell the goods on credit to your customer. It attracts a lot of customers. Moreover, it is attached with an element of risk of bad debt. Hence, any business that is looking for expansion should manage the account receivable to improve the overall return on the receivables. It means that the investment in accounts receivables should be at the optimum level. One should achieve it by comparing the benefits with the costs for maintaining the receivables.
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Improve overall liquidity
The companies must manage the working capital to improve the company’s overall liquidity. If you are looking for how to calculate working capital, you must take the help of the formula to calculate your working capital.
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Look for the customer demand.
Reduced demand for goods can cause inventory build-up. For this reason, the company requires some time to readjust the production level according to the changing demand scenario. The majority of the sectors experience deterioration during such a situation. Hence the companies should look for the customer demands to plan their inventories adequately. It will ensure the optimization of working capital. One can also check the working capital formula to look for the current working capital in the organization.
Every company requires a structured and tailored approach to optimize the working capital that happens to leverage data analytics and emerging technology with the help of an effective governance mechanism to drive business decisions. It helps to optimize the overall cash along with the working capital.
Also, the innovative technology solution helps to optimize the flow of cash in any business with the help of automating internal processes. It results in preparing accurate cash flow forecasts while improving real-time information access. Hence every business should look for working capital management as a holistic strategy that helps to improve the profitability and efficiency across the organizations rather than only as a financial practice.