2 min read
25 May 2021

Managing working capital is crucial for the long-term financial health of your manufacturing business. In the current fiscal landscape, working capital management is vital to sustaining a healthy cash flow.

Here are five tips to help you effectively manage working capital for your venture.

Pay suppliers on time

A disciplined payment to suppliers and vendors helps you foster strong relationships with them. Thus, you stand on a healthy ground to negotiate better deals and discounts. When you keep your suppliers happy, you can bag significant concessions on bulk buying and recurring orders. It maximises the credit period and saves money.

Paying your suppliers on time makes them more flexible when it comes to prices. It will also help you build your brand value in the market.

Constructive inventory management

Prudence in inventory management is one of the fundamental pillars of effective management of working capital. It is important to note that while maintaining optimum inventory levels is crucial, over and under-maintenance can take a toll on your working capital.

Inventory levels beyond demand result in a cash outflow for maintaining them. On the other hand, you may experience a shortage in sales because of under inventory, affecting your revenues.

Hence, as a businessperson, you need to check inventory levels to address overstock and under-stock issues.

Have an efficient collection system

An essential aspect of any business is to develop an efficient collection system. Send out invoices as soon as possible to cut delays in payment. Deploy technology for electronic delivery of invoices to bolster the process of billing and collection.

Don't wait until the end of the month to send invoices to your customer. Do them as soon as you sell your goods or services. Thus, you can shorten the cash inventory cycle. Also, make sure that the invoices are accurate to avoid payment delays. It's a good idea to send periodical reminders to your customers regarding payment.

Do follow up regularly to make sure you receive your payments on time. The cost of chasing customers for payments can be a tightrope walk that can put your current finances under pressure.

Discount with Care

While customers expect significant discounts, doing so for an extended period can affect your working capital. Make sure your dealers know the limits of what and how much they can offer. Analyse the cost of production of your product and instruct your dealers accordingly. Update your accounting packages to integrate the ongoing discount and keep meticulous records.

Additional Read: How a Flexi loan is an ideal way to meet your working capital needs

Choose Flexi business loans

Flexi business loans can aid you in effectively managing your working capital by giving you access to immediate credit. With the help of these loans, you can:

  • Balance credit crunch due to delay of payments
  • Buy new equipment
  • Expand funds
  • Buy fresh stock
  • Take care of day-to-day working capital needs

We, at Bajaj Finserv, offer Flexi business loans. These are tailored as per the requirements of the manufacturing business. Our Flexi business loans allow you to withdraw funds as and when required within your credit limit and repay when the funds are available. This scalable lending option syncs perfectly with your working capital requirements. Since the interest is paid only on the available funds, it helps keep your lending costs low. Talk to us now to know more about the features and benefits of our latest offering.

Additional Read: 5 tips to manage working capital for your trading business

Effective planning is the key to success

As a businessperson, you must determine your business requirements to analyse ways to manage your working capital. Your business requires finance at different stages to meet various needs. Working capital is the oxygen that keeps your business running with vigour. Meticulous planning and the ability to identify forthcoming necessities go a long way in ensuring the smooth management of funds.

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