Among the main reasons for businesses to fail is insufficient capital. Net working capital is obtained by subtracting current liabilities from the current assets. Did you know that there are four accounts that are regarded as very crucial for working capital management?
1. Cash. This is what pays your bill; hence, make sure that you have sufficient cash to get though all your sales cycle. The inability to pay loans, bills or other expenses can definitely put a lot of pressure on a business. You will surely improve your working capital if you focus on cash generation without adding anything on your liabilities.
2. Inventory. This is an operational balance that businesses must strike on a case-by-case basis. Due to the fact that business greatly rely on their stocks to make a profit, inventories are very important.
3. Accounts Payable. This refers to what you owe to your suppliers. Sooner or later, you must pay them. The type of financing option you choose will determine the terms of your accounts payable.
4. Accounts Receivables. This refers to the amount of money your customers owe you. In today’s very tough economy, efficient accounts receivable management tools are very crucial to reduce delinquent accounts. If you follow some practical actions, this will help give you a significant boost.
Trivia Info Resource: www.business.hsbc.co.om