5 Tips to Manage Working Capital for your Service BusinessMarch 7, 2019
It would not be an exaggeration to state that working capital is the major life-wellspring of any business. Realizing how to deal with the functioning capital appropriately, for that will guarantee a thriving income for the business, and furthermore get benefits. Even if you avail of a working capital loan you need to know the right way of managing it. It should ideally be mastered not only by businesses suffering losses, but also businesses that are otherwise prosperous and thriving.
The following are some useful tips for managing working capital for your service business-
- Seek payment early- to put in simply, you always have to keep the money coming in. Most businesses have a lax attitude towards delays in receiving the money owed to them, and they do not get to preparing invoices immediately. Instead, they wait for a certain date to prepare them, and even after that, there is usually a 30 day period that is given by companies to settle. The follow-up for payment on these invoices begins only after the due date has passed, which leads to further delay in payment. Service businesses should rather strive to involve more people to track and actively purchase payment from the client. Getting your receivables in a timely manner can really give a boost to the working capital and help meet current expenses.
- Efficient inventory management and forecasting- an inventory can be optimally maintained in many ways. One of them is to deal in consignment stock, where the stock is held at your place and payment needs to be done only after it is sold. Another way is to follow accurate forecasting, wherein you can save working capital by making a correct assessment of the quantity of products needed, and by not ordering more than needed. There is software available that can help in forecasting.
- Offer discounts prudently- often, the sales team, ends up giving discounts to customers in order to meet their targets. This can have negative consequences in the long run. The sales team should be made to understand the cap on how much discount they can give. It is advisable to give them a short training session on the impact of discounts on the business. It will also prevent them from over-negotiating to close a deal.
- Keep detailed records- it is usually a tedious process to follow up and get a due payment from the debtor, who often makes excuses to delay payments. It is a good idea to keep a record of all correspondence with them, including details such as mode of communication, date, time, agreed terms, etc. Eventually, this will not leave any room for the debtor to manoeuvre his/her way out of making the payment.
- Be on good credit terms- maintaining a healthy and positive relationship with suppliers will lead to flexibility and comfort in dealing for both parties.
If you are on the lookout for a business loan for service enterprise, Bajaj Finserv is your go-to solution. This NBFC offers attractive MSME and SME loans for the growth and expansion of any kind of business. You can avail as much as Rs. 30 lakh at low interest rates. Be it a small or a medium scale business, these loans offer the perfect financing solution. The loan can be availed in just 24 hours and with only 2 documents.