Working capital strategies for effective management

Apr 28, 2016 | Small Business Finance

Working capital management can become a competitive advantage in your business. Securing small business finance to support your growing company is challenging and a smart business operator should implement a Strategic Plan to fund growth.

Strategy 1. Lay the foundation by defining your attitude toward risk. Seek expert advice of what levels of risk are sustainable within your industry and acceptable to the management team.

Strategy 2. Determine the appropriate level of debt capacity the business is willing to spend on technology systems, customer acquisition and retention, employee training and incentives offered, delivery processes, branding and marketing. The key is the overall ability to support a sustainable level of debt.

Strategy 3. Determine the optimum mix of debt-to-equity funding and alternative sources of finance. When considering between bank and unsecured business finance the business owner or management team factors in the borrowing rate, assets required to secure the loan, the use and purpose of funding, its credit position and the ultimate revenue and profits to be derived from the funding investment.

Strategy 4. Analyse various sources of working capital around debt and equity including cost versus return, terms and conditions and overall benefit to funding growth. Implement the 4 way working capital strategy to make your business work more effectively and efficiently. That is a fully developed strategy on;

  • your people and education
  • your delivery and distribution procedures
  • your marketing and sales strategy
  • and most importantly your systems and technology to efficiently run the business.

invoice finance working capital loans

 Working capital plan must be incorporated to determine your cash flow highs and lows. 

Strategy 5. Protect against loss of business. Natural disasters are just one thing business owners need to plan for to protect their business. There are many other factors such as business assets, operational risk and economic downturn that need to be mitigated.

  • Does the business carry high levels of stock?
  • Is the business totally reliant on operation of machinery?
  • Is the business totally dependent on one method of selling?

Working Capital Insurance cover to protect against;

  • Business interruption to cover loss of gross profits if the business operations are stopped due to loss or damage
  • Public and product liability to cover liability for personal injury or property damage connected with your business activates, products or services
  • Professional indemnity to cover for claims from allegations that your product or service caused financial loss to your client
  • Fraud cover to cover loss of money or goods from dishonesty committed by employees or other associates
  • Key man cover to assist the business if the key person dies or becomes unable to operate the business
  • Personal accident or illness cover to your income if you are prevented from earning an income from the business

For more information about working capital strategies for small business visit Accrutus Capital, or complete your online enquiry to get funded fast.

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