Regardless of any company’s size or industry, careful cash flow management and managing working capital is crucial to every business. Providing top-tier services & goods, marketing and other tools for growth are all reliant on the company having an equitable amount of managed working capital.

The Covid-19 pandemic has raised significant working capital challenges and uncertainties for organizations. Supply chain disruptions have been a major challenge, along with changing consumer demands and the collection of receivables.

While we have established the inherent necessity for managing working capital, let’s look at some ways in which it can be improved.

1. Control expenses carefully

In any company, the amount of small expenses that rack up are tempting to ignore and leave for another time. However, they can mount up significantly and substantially affect the business’s working capital, sneaking up on the business until it is a problem. Setting clear budgets, processes, and rules for different facets of your business can make all the difference. Introducing card programs and management systems for expenses will allow you to view this all-in depth and take instant, remedial action when a problem is starting to arise. For example, creating separate checklists for internal processes can set clear parameters for actions that will occur often, such as hosting events, catering, parking fees etc.

Control Your Expenses

2. Pay Vendors on Time

Enforcing payment discipline should be a key part of your payables process. Analysis of working capital levels shows that the biggest improvement comes from improved payables performance and reduced days payable outstanding (DPO). Extensions on DPO should no longer be considered a viable option. Particularly with many vendors having been affected by the pandemic and therefore unlikely to offer the option. Additionally, accounts payable teams often deal with an abundance of unnecessary and costly support communications regarding unpaid or late invoices. The time and resources needed to address these issues can be significant, while also eroding supplier confidence.

Identifying and addressing this issue is not so much an opportunity to recover lost funds (at best, it will minimize penalty payments), but it can help identify and eliminate potential risks for key supplier relationships.

Paying Vendors on Time lead to increase supply chain productivity

3. Proper Inventory Management

Firstly, we won’t touch on this one heavily, as “Cash Flow & Inventory Control: Find the Gap” delves into tips to improve your inventory management. Inventory management is crucial, as it is the primary asset that makes your business revenue. Determining the right amount of inventory to have on hand is a key factor in working capital management. Too little stock and you risk losing out on sales revenue. Likewise, too much stock and you risk tying up too much cash in the storeroom. This means that you end up with not only an inefficient use of working capital, but also reduced cash on hand.

Utilising efficient inventory management is crucial to a positive cash flow

Need help with improving your cash flow and managing working capital?

Here at BUSINESSNAV, we are experts in assisting companies to unlock their revenue potential. By navigating their cash flow to safety, security, and sustainability. This, in turn, does wonders for the growth of the company. We help nurture that potential and transform that into quantifiable results. Call us on 1300 BIZ NAV (249 628). Or email us at and talk to us about how we can help grow your business!