How to increase working capital and keep your business agile
Working capital measures, the efficiency of a company in terms of how it operates against its short-term financial health. The working capital ratio (Working capital = current assets – current liabilities), indicates whether a company has enough short-term assets to cover its short-term debt. You need to make sure that you always have a good balance. Too little working capital could lead to bankruptcy while too much working capital could lead to decreased profits and shareholder value.
This article on PayPal Working Capital will give you a good insight into the possibility for short term loaning which you can then pay back in a similar way to a cash advance. As well as this option, here are a couple of ways you can maximise your working capital for your start-up business:
Profit
Stop billing your clients at the end of the month! The sooner you create an invoice after the product or service has been delivered, the sooner you’ll garner the profits. This is best practice for maintaining healthy cash flow.
Also look into different creative ways you can start to bump up your profits quickly. It’s worth checking out The Balance for six profit boosting ideas that you might not of thought of before.
Replace short-term debt with long-term debt
Having a series of short-term temporary loans, can sometimes look unreliable to investors. So as soon as you start to reach your projected monthly profits, you should consider taking out a longer-term loan, to continue improving and growing your business.
It is also very important that you keep your business agile in order to be at the top of its game and current in all aspects so that clients and customers know they will always be getting the best service possible. This should in turn boost your working capital. Here are a few key points in order to maximise your business:
1. Make use of technology
Technology is constantly changing. From big computers and fax machines to laptops and smartphones, the world of devices and the features now accessible are more and more advanced. A business in this day and age must prioritise having fast technology with simple and reliable software both for employees and consumers. This Forbes article provides more information on how technology is changing our business approaches.
2. Communicate via social media
There is now a plethora of different social media platforms, vital for expanding your business clientele. Make sure you have someone keeping it up to date all of the time, with new products, events, openings etc. to optimise the extent of your reach.
Most people look to social media now whether that be Facebook, Twitter or LinkedIn for any updates or new products and services. It is a fast and useful tool for making your business go viral. Make sure everything you post is always appropriate for your target audience, however, as while social media is vital for spreading information and opinions about your business, you want them to always be positive.
3. Be open to change
While you may be comfortable running your business the same way you have since you first started, you may have noticed that the lack of change is slowing things down. You have to accept that some projects fall through, and demand for specific products can suddenly decline.
Make changes to the way your business looks aesthetically, because just as seasons change so do décor trends and you need to move with them. You will require good working capital in order to successfully make these changes without being concerned about financing them.
4. Set goals for growth
Although you may have massive goals for the future, for example earning a 6-digit profit at the end of each month, it is wise to break these up into small scale goals that will propel you to getting that eventual big figure. For a start-up, having goals is essential to keeping things going and avoiding a business that begins to plateau. You still want to make your goals tough enough that you don’t become complacent. Therefore, a good way to achieve this is to have a look at your market and its growth and then set a goal slightly ahead of that.
