4 Effective Capital Management tips for your Business

Working capital refers to the total current or short term assets of the firm including cash, accounts receivable, marketable securities and inventory.

Proper working capital management is a major step for ensuring that you maintain sufficient liquid resources for your daily business operations.  The most effective tips that can help you in effectively managing your working capital include the following:

4 Effective Working Capital Management Hints for your Business1. Perform proper cash flow forecasting

This process should take into consideration the market cycles, the actions performed by your competitors, the loss of a valued customer and the impact of unexpected events to the overall performance of your business. It is also advisable for you to take into consideration the unanticipated demands of working capital.

2. Create contingency plans for some unexpected events

No matter how profitable your business is, you have to make sure that you still prepare plans that will help you deal with those unexpected events that have an extremely damaging impact to the performance of your business. You should hone your skills in effectively managing uncertainties by preparing risk management procedures. But you have to make sure that the risk management procedures are established based on the realistic and objective view of your working capital needs.

3. Working capital should be used in a corporate wide basis

In order for you to effectively implement this tip, you need to make sure that the following are in place: information access, good linkages between billing and production, good treasury practices, efficient banking channels and internal systems that can be used to move cash from one location to another.

4. Establish effective procedures in managing disputes

These procedures should be linked to customers. This move can be expected to be a major step in freeing up cash that have been locked in because of certain disputes to customers. You can also expect the dispute management procedures to improve customer service while freeing up a lot of time for legitimate activities such as cash collection, sales and order entry.