Suresh Tanwar owns a flourishing logistics, packaging, and transport business. He handles nearly all aspects of his company, from sales, marketing, operations, and customer service, to finances. Sooner or later, finance, especially the lack of working capital, tends to become a challenge. Suresh needs to invest in his growing business, like any other Small and Medium Enterprise (SME).
This scenario, common among India’s SMEs, calls for smart management of available monetary resources, ensuring that company has the required business capital to keep operations running . After all, the survival of a business is directly dependent on its ability to seize the next growth opportunity. Businesses also inevitably face situations of sudden, unforeseen expenses. If these working capital needs are not duly addressed, business operations can be affected and profit margins can drop.
Here are 7 tips for business owners like Suresh Tanwar to increase their working capital.
1. Try working capital financing
Procurement of a working capital loan through conventional banks is largely prohibitive, for several reasons. Often, small business owners have no collateral to offer against the loan being sought. This is a major reason why traditional financiers tend to reject loan applications from SMEs. Inflexible lending policies, laborious paperwork, and extremely slow disbursement times by banks also act as deterrents.
Faced with the recurring business costs, and the inability to acquire business capital via traditional bank loans and overdrafts, SMEs are quite likely to find themselves in a tight corner.
Working capital financing offers a constructive way out. An increasing number of SMEs are now opting to meet their working capital needs through lenders other than banks and traditional lending institutions. Capital Float is a digital finance company that funds small businesses. We have assisted manufacturers, B2B service providers, buyers, distributors, travel agents, and many other businesses with easy access to timely credit.
A range of custom financial products offered by Capital Float can help solve the problem of increasing working capital. Flexible, fast, friendly, and affordable, these loan offerings ensure borrowers have access to the requisite amount of business capital, right when they need it.
The B2B e-commerce segment is seeing exponential growth in India. A report suggests that the growing presence of B2B e-commerce platforms has offered SMEs access to competitive pricing and has also reduced inventory costs by 40%. This serves to ease the business’ working capital needs considerably.
SMEs have also benefitted greatly from being connected digitally with buyers and sellers through e-procurement. Elimination of middlemen and their related costs means that they earn more revenue. Besides, a digital platform offers SMEs an added advantage of being able to negotiate with a wider base of suppliers. Finally, the process of e-procurement curtails spending.
3.Proactively manage inventory
SMEs need to replenish their inventory constantly. Earlier, there was a need to hold vast amounts of stock, putting pressure on working capital. Miscommunication within departments would also lead to stockpiling and increased costs.
However, rigorous stock checks coupled with e-procurement can bring down such needless expenditure. This greatly eases the burden on working capital. Active management of inventory eliminates the need for advance buying and helps you move towards just-in-time delivery of goods. Efficient inventory management thus holds the key to increasing business capital.
4.Keep track of collections
Businesses often face issues of delayed payments from customers. A smart business manager needs to get past excuses for delayed payments. Creating accurate and timely invoices goes a long way in avoiding deferred returns. Such receivables billing also helps avoid bad debts and cash crunches. Rigorous follow-ups on billing and collections will have a positive effect on the working capital as well.
5.Keeping suppliers happy
Timely payment to suppliers helps develop better working relationships, and works wonders for the business. Besides, it enables SMEs to negotiate better deals. Not being able to pay vendors on time results in a strained working relationship, which could cause delays in deliveries and poor quality of services. Naturally, this can wreak havoc on a business as delays and operational inefficiencies eat into working capital.
Keeping suppliers happy is likely to have added benefits for SMEs in the form of discounts that largely serve to ease the need for working capital. Courtesy early payment, bulk supply and/or regular orders become easier, ensuring that business capital isn’t affected, adding that much more to the liquidity of funds.
6.Keep expenses transparent
It is no mean task to run a business smoothly, especially when it comes to managing finances and having to put aside working capital to seize the next big opportunity. Even smaller hidden expenses can have a cumulative negative impact on an enterprise’s cash flow. Making expenses more visible therefore is an intelligent way of managing finances. This includes setting clear rules in areas such as travel and accommodation, deploying necessary tools to monitor expense claims, and so on.
Running into financial troubles is a given for any enterprise, big or small. How well a cash crunch is handled depends on how much cash a business has in its kitty for unexpected expenses. A financing firm like Capital Float enables enterprises across industries with quick and easy access to funds, to tide over times like these.
A trustworthy partner will walk that extra mile with people like Suresh Tanwar, and help them fulfill their entrepreneurial dreams. Capital Float has been serving SMEs for over 3 years, providing affordable loans, anytime, anywhere, in a manner that is customized to an SME’s business needs.