Without enough working capital it’s impossible to keep your business running smoothly.  Managing cash flow can be difficult, especially if you don’t know how much cash you need to have on hand.  Ideally, your company should maintain a 2:1 ratio, meaning that for every $1 of liability you have $2 in assets.  Here are six tips to move you closer to this goal.

1. Negotiate Better Pricing

While you don’t want to be constantly negotiating on pricing, it’s recommended to review supplier contracts regularly to see if better pricing is possible.  If a current supplier isn’t willing to negotiate with you, consider finding a new supplier. Loyalty to suppliers can help your business in the long term, but if you need to improve your cash flow now, moving on can ensure your business’s future.

2. Improve Accounts Payable

Managing when and how money goes out can help manage your working capital better.  Consider negotiating better payment terms or improving the management of the payment process.  You might ask your vendors if they offer a discount for early payment.  It’s surprising how much a minor change in payment management can improve your cash flow.

3. Recover Accounts Receivables

More cash coming in on time is great for your business.  Make sure your customers are paying on time and provide incentives if needed to get cash in quickly.  If you have a collections team, consider motivating them with incentives to improve the number of payments collected on time.

4. Minimize Expenses

Short term cuts in expenses immediately improve your cash management.  You should periodically review your fixed costs to see where reductions can help improve cash flow.  Consider if investing in technology can present savings for the future without jeopardizing your current finances.

5. Scrutinize Taxes

Overpaying on taxes hurts your capital position.  Look to make sure your business is taking advantage of all the tax breaks possible.  Consider talking to a tax professional for advice if you don’t feel confident reviewing the tax code yourself.

6. Audit Customers

Another way to improve your accounts receivables is by analyzing your customers for credit risk. Late payments and failures to pay hurt your business’s ability to grow. Knowing which customers or distributors are likely to cause trouble can help you add specific terms to their contracts to reduce your repayment risk.

Each of these tips can have a significant impact on your working capital.  Keep reviewing your finances and working to successfully manage your capital.