Effective management of working capital allows companies to maintain an adequate cash flow for meeting short term obligations and goals, leading to a reduction in the requirement of external borrowing and helping them in their business expansion. Regarding this effective management, there are several ways for it, but before one must be aware of how to acquire working capital and how is it calculated.
One can opt for a business loan to acquire funds for one’s business. These loans require one to follow a process similar to an online business loan application, and when it comes to calculating the working capital, one simply needs to subtract the firm’s current assets and current liabilities.
Now coming to the various ways of improving working capital management, firstly, one can reduce the gap between the accounts receivable and accounts payable. Bridging this gap implies leaving lesser money for operational expenses.
Secondly, an individual can opt to automate the accounts receivable as such automation makes it efficient for the firm and the customers as well.
As a third possible way for managing working capital, one can opt for inventory management through software similar to the way done while automating the A/R. This software can identify items in a better manner that is not selling, thereby avoiding overstocking.
Finally, lowering the debt servicing expenses can prove to be a handy way for managing working capital. One must note whether or not one is paying substantially high interest or acquiring loans regularly, which needs high origination cost.
All of these above mentioned ways would help any business owner to improve working capital management in India.
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