Management will manage working capital using a combination of rules and strategies based on the aforementioned criteria. The policies are designed to manage current assets (usually cash and cash equivalents, inventory, and debtors) as well as short-term borrowing in order to achieve acceptable cash flows and returns.

Controlling the flow of money. Determine the cash level that permits the company to cover day-to-day needs while lowering cash holding costs.

Inventory control. Determine the inventory level that enables for continuous production while lowering raw material costs and reducing reordering expenses, resulting in increased cash flow. Aside from that, manufacturing lead times should be shortened to decrease Work in Process (WIP), and finished goods should be maintained to a minimum to avoid overproduction management.

Looking for ways to increase your working capital

An unsecured revolving line of credit might be a good way to boost your operating capital.

Lines of credit are designed to support short-term working capital needs, with terms that are more advantageous than company credit cards and the ability to draw exactly what you need when you need it.

While a company credit card might be a convenient method for you and your top workers to handle incidental costs such as travel, entertainment, and other necessities, it is rarely the greatest answer for working capital.

Increased interest rates, higher costs for cash advances, and the ease with which one might accumulate excessive debt are all limitations.

Avoid working capital blunders

• Short-term working capital requirements should not be confused with longer-term, permanent requirements.

• While it may be tempting to utilise a working capital line of credit to buy machinery or real estate, or to hire full-time personnel, these expenses require other types of financing. You won't be able to use your working capital line of credit for its original purpose if you use it for these charges.

• Your small business lender can assist you in better understanding your working capital requirements and the actions you'll need to take to plan for any eventuality. While you can't forecast everything in business, having a clear picture of your working capital may help you manage your business more effectively now — and put you up for long-term development tomorrow.