Take Control Of Your Working Capital Needs

Strategic changes are required in order to fix and control working capital needs

. Every small business owner is responsible for managing the budgets. CASH being the lifeblood of every business needs to be controlled strategically, because if it is ignored then business failure will be the only possible conclusion.

The first step towards controlling and avoiding a working capital disaster is

1.Forecast Your Capital Needs

By forecasting your yearly working capital needs, you will better understand and manage the possible cash leaks and mistakes which might be draining your business of cash.

Knowing where the cash flow stands currently and where it will be in future, will help you in creating a 12 month plan. This plan will help you in understanding the highs and lows of your cash flow. For example, you will know when to expect surging financial needs and when all payments will be due.

2.Balance Your Terms

Create balanced terms with your suppliers and customers. Set these terms in such a way that they are beneficial for all.

3.Create Your Collection Strategy

Create your collection strategy by asking yourself the following questions

How long is it taking to get paid?

What is your collections activity?

Are you getting the right level of contact with your customers?

Are you identifying disputes fast enough?

When you identify disputes, what is your policy for getting them resolved?

By answering these questions, you will remain on top of your businesses outstanding payment problems.

4.Segmentation

Divide all the departments that deal with the cash flow into segments. Whether they are your suppliers, customers or your inventory, make separate lists of external and internal sources of cash. Track where the money is going and where the money is coming in from. You might have spent extra on the inventory. Or your customers pending payments might be affecting your cash flow, or on the other hand, you might be paying more than required to the suppliers without even knowing it.

5.Companywide Priority

Employees are motivated by the targets set for them. Cash flow management is every small businesss priority, and you should make sure that your related staff understands that. Hence you should create a list of every area and department that effects and utilizes cash in one form or another.

The success of your business will entirely depend on the way you strategically plan your cash flow.

by: Lindae Williams

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