Three Ways to Boost Working Capital

For more than two decades, Iowa Certified Public Accountant Bruce A. Willey has worked in the area of tax law. A consultant for American Tax Law Planning in Iowa, Bruce A. Willey has helped businesses with a wide range of issues, including boosting working capital.

Below are a few ways to increase a company’s working capital:

Offer early payment incentives
Giving customers incentives for paying their bills early speeds up how quickly customers pay and reduces the rate of late or ignored invoice payments. Further, these incentives can be as simple as offering a 1 percent savings on invoices if paying within 10 days, meaning they won’t negatively impact business sales in a significant way.

Pay suppliers on time
Although doing this can be challenging for companies that are dealing with a lot of bills, it is an important part of boosting working capital. When a company pays its suppliers on time, it is in a better position to negotiate deals. These deals can help companies save money without sacrificing the quality of their products.

Promote clear communication when handling AR
An effective company maintains clear lines of communication when dealing with accounts receivable (AR). After sending out invoices, companies should call those invoiced to check that invoices were received, whether those invoices are accurate, and whether they have been approved for payment. Further, good communication in the area of AR helps businesses track various problems that could affect invoiced parties’ ability to remit payment in the future.