Discover 3 tips to increase your company's working capital

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How to increase working capital? This is a recurring question among many micro and small entrepreneurs . After all, there is no doubt that this “element” provides the possibility of maintaining the operations necessary for the company to function.

In practical terms, working capital can be described as the amount (financial resources) that a business requires to carry out its economic activity. Its importance for the success of the enterprise is indisputable, especially because it is through this capital that you will be able to pay suppliers, employees and taxes, for example.

In this article, we will present three tips for increasing working capital. It is a ios database read and therefore deserves your full attention. Enjoy!

How to calculate working capital?
First, it is important that you know how to calculate it. Generally speaking, the calculation of net working capital (NWC) consists of subtracting current liabilities (CL) from current assets (CA). The formula is: NWC = CA – CL.

Current liabilities refer to all fixed, predictable or programmable costs and expenses, such as:

accounts payable (suppliers and services in general);

wages and labor charges;

loans;

rentals;

between others.

Current assets correspond to all available resources that can be easily converted into liquidity, which includes:

accounts receivable;

amounts in bank accounts;

financial applications.

The greater the working capital, the greater the business's ability to meet its commitments and make the necessary investments for the company's growth.

How to increase working capital?
Now, let's get to what we really want to achieve with this content: the three tips for increasing working capital.

1. Have good control
The first tip is to have good control. Understand: it is precisely in its absence that the main errors in financial management occur , generally causing problems in cash flow.

In this sense, it is necessary not only to control entries and exits, but to carry out planning with future projections and detailed information regarding all movements.

2. Negotiate
It is important to always negotiate! Given possible delays in payments, whether due to your customers' default or a simple oversight, not receiving the amounts expected for a given moment can harm your accounts.

For this reason, if this actually occurs, negotiate a longer term with suppliers, trying to avoid extra interest and possible late fees, for example.

3. Pay in installments when possible
Even if you have the capital in cash for a cash purchase, it is interesting to consider paying in installments, especially when there is no interest.