Barclays claims over a quarter of UK small businesses struggle with late payments. This limits your working capital and is one of the main reasons start-ups fail.
Straining for working capital halts your ability to adapt to demand, make changes and improve your business processes. Stress makes it harder to function. Your problems start to stack up.
But you can avoid this fate with the right approaches. There are ways to free up your working capital and hit your business goals.
Read on to learn more.
1. Assess Where You Stand at Present
You will struggle to get where you want to go if you are puzzled about where you are. Use auditing to analyse your weaknesses. Where could you free up working capital?
Competitor analysis acts as a benchmark; it lets you know how you are doing. How does your competition optimise cash flow?
Areas to focus on are invoicing, late payments, stock levels, payment risk and your procurement cycle. Optimise these areas to access more working capital.
2. Cut Your Cycle of Operation
A shorter cycle lets you switch things up on the fly, but it also boosts your cash flow. Your production cycle will speed up, and your sales will hit your accounts in less time.
This approach worked for many UK high street clothing brands like Zara. A short production and sales cycle let them meet demands with minimal wasted stock.
Ask for upfront payments or deposits. Cut back on your credited sales. Forecast your sales and anticipate demand.
3. Automate Your Processes
You can automate everything from needs analysis to orders to accounts payable. Use pay-to-purchase tools like Xelix to make your procurement automatic and fluid.
Automate invoices and late payment identification. Track transactions and access real-time data, then use them to assess your current position.
Manual processing is prone to errors and delays. It takes time out of your schedule. But with automation tools, your cash flow will be efficient.
4. Avoid Excess Stock Levels
Stock what you need to operate but huge volumes of stock weigh your business down. When all your working capital is in the warehouse, you limit other cash-dependant activities your business needs.
The current supply chain issues in the UK make it tempting to hoard stock. Try to avoid excess. Accurate forecasting and reporting can help you meet demands.
5. Consult with Financial Experts
Banks that specialise in start-up finance can help with your working capital. A financial advisor can take you step-by-step through cash conversion issues and find solutions.
Credit insurance helps protect your working capital. Late payments could tie up your cash flow, but the right insurance keeps things moving.
Boost Your Working Capital Today
Many of these tips take little time to implement. You could see improvements fast if you act with efficiency. Automation helps you track your transactions but also gives you more time to assess any issues.
Having experts on your side helps, but optimising stock levels and honing your operation cycles puts cash in your accounts too. You never know when your business will need it.