The right capital investment is the backbone of each and every business. Without the support of working capital, none can sustainably manage the cash flow, cost reduction, risk reduction, etc. This is why it’s really important to follow the most creative capital solutions which will be functioning just right for a small company. Small or big every business has a different financial situation and so an organization should adopt capital solutions depending on its strategies and programs.
Key goals of capital management
- An efficient capital solution is crucial for maintaining smooth operations and improving the profitability of a business.
- Creative capital solutions play a vital role in managing different company activities including debt management, inventory management, revenue collection, and much more.
- This method also identifies the areas which need more attention to maintain profitability and liquidity.
- Working capital management is essential for every business. This ensures that the business has enough liquidity to meet its short-term obligations.
- A capital solution maximizes the return on current asset investments by covering unexpected costs.
This article will focus on the top five capital management solutions that will maximize cash flow.
- Days Sales Outstanding (DSO): It is the average measurement of a business’ debtor exposure. The DSO helps in measuring the level of outstanding revenue at the end of a month based on the number of days sales/revenue represented by accounts receivable balance. This method is useful in detecting the gap between DSO and BPDSO.
- Days Inventory Outstanding (DIO): This is the financial and operational measurement that expresses the average number of days that the company takes to sell its inventory.
- Electronic Invoicing: This is one of the most creative capital solutions that can help a company to achieve working capital benefits. The streamlining of the invoicing process automatically minimizes the risk of errors, making sure the consumers are receiving it as soon as possible.
- Supply chain finance: For the buyers, it’s also popular as reverse factoring which enables them to offer early payment to the supplier through third-party funders. The supplier can boost the level of DSO due to the early payment at a low cost of funding.
- Flexible funding: The working capital providers also offer flexible funding that will help a buyer to move smoothly between supply chain finance and dynamic discounting models. It is effective for a risk-free return on the excess cash of a buyer.
These were some of the most creative capital solutions that are being used by businesses worldwide. There are too many capital partners who help the clients to determine the best strategy to access new sources of capital more efficiently that deliver enterprise goals. The capital advisory experts have unique knowledge of the insurance marketplace that effectively enables the clients to maximize their returns. So, stabilize the cash flow with the use of working capital solutions and meet the growth plans.