Working Capital: How To Optimize Your Funds
It’s the capital in your business that’s used for day to day operations. It’s a measure of the efficiency of the company and its financial health in the short term. In other words, it your companies assets minus your company’s current liabilities. Yes, working capital is very important. So how do you keep your working capital…well, working?
Take a careful look at the spending across areas of your business. You could be spending too much money on repairs of your equipment. Repairs can’t be avoided – but you could choose to lease your equipment, to ensure your equipment is new and not outdated, and prone to breakdowns/repairs. In addition, purchasing equipment can have higher upfront costs compared to leasing. Leasing equipment can keep cash flowing in your business.
On the other hand, leasing could be sucking the capital that you have at hand out of your budget and barely leaving room for growth. Go over spending with fine toothed come and make sure that the ROI on your vehicles and equipment are being directed into the correct avenues, pitting leasing versus buying.
Invest in the Right Areas
You can choose to place your working capital wherever you want to place it. But if you place it in the wrong areas, you’re going to plateau. Instead, place your funds into areas that have the greatest possibility of creating an increase in cash flow. Generating new customers and using money in marketing or sales could be an important investment, if you need to drum that up before it makes sense to pour your capital into production.
Overstocking your goods puts a ding in your working capital. It’s a nice idea to be able to offer a large selection of merchandise, but not at the cost of having items that won’t sell. You’re also causing your holding costs to soar. Free up the amount of working capital spent on your merchandise by really taking a look at what does and doesn’t sell, and only have the necessary products in stock.
Get on the Books
Reducing inaccuracies in your bookkeeping will help give you a clearer picture of where your money is being spent. If you’re not tracking it at all, well – you need to get accounting software and work with an accountant. You can make more informed business decisions when you have an overview or your expenditures and advice from an accountant on how to use your working capital.
Need an equipment loan? TopMark Funding has everything that you need. When your working capital is healthy, your company is healthy also. That means you’ll have room to expand. And when you expand, you have a higher need for production. You’ll need a loan, and we can give you a loan at the most competitive rates in the quickest amount of time possible.