With the economic recovery still in its early stages, but showing signs of continued growth, finance industry commentators are looking at ways to further strengthen UK businesses. One area which is ripe for focusing at the moment is managing working capital.
There have never been more options available to firms to manage their working capital and, with the cost-effectiveness of using an outsourced accounting office, many smaller business are recognising this.
There are always ways in which a firm’s working capital can perform better, and with the right professional advice and these top four tips, it will:
1. Alternative funding
Though lending by banks is getting better than it has been in recent years, alternative funding is still a real opportunity to boost cash flow for many. There are many asset-based finance solutions for example, which could realise the value of stock, IT assets, property and any other owned items.
Invoice-based lending, such as discounting and factoring, is also an option. A professionally qualified chartered accountant will be able to crunch the numbers to see what would be the best option with which to move forward.
2. Supply and demand
Managing relationships with your suppliers is critical for business success and, if this is in place, there are many other opportunities that could open up. An essential part of managing a supplier relationship is ensuring you pay them on time.
A good outsourced accountant will make sure that payables are in order and, with that taken care of, a conversation to secure a better deal on preferential terms can take place with the supplier. This is a great way to drive up the value of working capital without taking drastic measures.
It is worth remembering also that early payment can get even better deals, as can ordering in greater volume or committing to a long term deal. This can undermine the exploitation of other opportunities as they present themselves, however.
3. Prompt payment
Ensuring prompt payment to suppliers is beneficial but, needless to say, so too is receiving prompt payment.
Customers will often look for any reason to delay payment and one area often cited is an incorrect or poorly prepared invoice. Accurate, clear and concise invoices should be the aim, as well as being an approachable face for the customer to discuss their account.
4. Control expenses
A major hole in working capital can come via staff expenses. Ensuring these are controlled with strict rules in place is therefore very important.