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How working capital helps your business stay agile

  • 2 min read

  • Highlights

  • Spend judiciously to reduce pressure on working capital

  • Increase earnings and keep aside funds for the future

  • Maintain a steady income by looking for reliable clients

  • Get a working capital loan to meet your immediate needs

An agile business finds it easier to capitalise on new market opportunities, can evolve to keep pace with advancements in technology or buying behaviour, and can diversify to suit new demand. You can ensure that your business is agile by fuelling its working capital. These funds ensure that you can spend on business needs like new hires with different skillsets, buy equipment or software, pay for needed inventory, employ marketing executives, and carry out R&D.

Stick to your trading plan

Take a look at the ways that you can ensure your working capital is sufficient enough to help your business stay agile.

1. Be watchful of business spending and income

Decide how much money you need to meet your day-to-day expenses, work around a budget every month to fulfill this. Ensure you have clients who do not delay payments and restrain from paying your suppliers before you get paid from the client.

Ensure that you do your bookkeeping diligently, so you can spot gaps in theworking capital before it widens and causes daily operations to stumble. Plan ahead by identifying an affordable working capital loan, which charges you nominal interest and has flexible repayment terms. Plan on investments only when you have excess funds, and when your earnings cross the working capital limit.Also, choose investments that give you high liquidity so you can withdraw your funds when needed. All this will ensure stability foryour working capital.

2. Don’t tie-up working capital in asset purchase

Your business may need expensive equipment or machinery for production. It mayalso need specialised software for client and inventory management or product development. Using your working capital to fund such assets can block it from coming to your use for day-to-day expenses. It is a better idea to take an affordable business loan or a customised machinery loan for such purchases. This allows you to pay for fixed assets in EMIs rather than tying up your working capital.

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Your business’ operating cycle depends on how soon you can convert your inventory into sales. So, invest in selling off ready products even if you have to sell them at a discount. Increase your marketing efforts and you’ll see your business liquidity increase.Plan your raw material supply in a way that it doesn’t sit in your factory or warehouse too long. This also ensures that you won’t waste space in storage, which will help you save a little extra on rent.

Apart from these three tips, increasing your sales and boosting earnings is the prime way to increase your working capital. Invest in people and services that ensure your business earns a regular income and increases earnings every year by taking strategic steps in terms of marketing, product development or expansion. Ensure that your working capital is sufficient so that your business can make the most of new opportunities and stay agile.

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