Careful financial management is essential for every organization that seeks growth and stability for the business. The difference between short-term assets and short-term liability, also known as working capital, depicts whether a company is agile enough to fund their everyday operations and future growth.
The short-term capital is one of the most prominent indicators of a business’s health. Sufficient availability of this capital also offers liquidity and operational efficiency, as well as points to higher growth potential for the business. Naturally, businesses strive to achieve and maintain this necessary working capital at all times to keep their operations running.
There are several techniques that an organization can follow to ensure effective management of this short-term capital. Starting from conducting a thorough analysis of their operations, they can point out the gaps in existing contracts that may delay timely cash flow.
Similarly, they will also gain a clear idea about how much financial backing they require at all times to ensure steady operation, and can avail credits like business loans to acquire much needed financial backing during slowed-down business operations.
Controlling goods and inventory, introducing an efficient receivables process, and timely paying the dues will also help map the inflow and outflow of cash. These can prove especially helpful in streamlining and managing working capital.
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