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Knowing the Do’s & Don’ts of Working Capital to Better Help You in Making a Working Capital Decision

Knowing the do's and don'ts of working capital can help you make informed decisions about managing your business's finances.


Here are some key do's and don'ts to keep in mind:

Do's:

  • Do maintain an adequate level of working capital: It is essential to maintain an adequate level of working capital to ensure that your business has enough cash flow to cover its short-term obligations and pursue growth opportunities.

  • Do regularly monitor and manage your working capital: Regularly monitoring and managing your working capital can help you identify potential cash flow issues early and take corrective action to avoid financial difficulties.

  • Do negotiate payment terms with suppliers: Negotiating favorable payment terms with suppliers can help you improve your cash flow and reduce the risk of financial difficulties.

  • Do focus on cash flow management: Managing your cash flow is critical to maintaining a healthy working capital position. Make sure you have a system in place for collecting accounts receivable promptly and managing your inventory levels to avoid stockouts and overstocking.

  • Do consider alternative financing options: If your business needs additional working capital, consider alternative financing options such as lines of credit or factoring. These options can help you bridge temporary cash flow gaps and pursue growth opportunities.

Don'ts:

  • Don't rely too heavily on short-term financing: Relying too heavily on short-term financing options such as credit cards or payday loans can lead to a cycle of debt that can be difficult to break.

  • Don't ignore your accounts receivable: Neglecting your accounts receivable can lead to cash flow issues and damage your relationships with customers.

  • Don't overstock: Overstocking can tie up your cash flow and lead to losses due to obsolescence, spoilage, or damage.

  • Don't neglect to budget and forecast: Budgeting and forecasting are essential for managing your working capital effectively. Make sure you have a clear understanding of your cash flow needs and plan accordingly.

  • Don't make impulsive decisions: When it comes to working capital management, it's important to take a strategic approach and avoid making impulsive decisions. Carefully evaluate your options and consider the potential long-term implications of your decisions.

By following these do's and don'ts, you can better manage your working capital and improve your business's financial health.

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Access to working capital in an affordable and efficient manner is essential for business.

We recognize the need for customized solutions as each business has differing requirements.

SupplySci provides accounts payable and accounts receivable funding programs to meet your evolving liquidity requirements combined with our product procurement program.

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