• Working capital is the lifeblood of any business, and it is crucial for the organization’s survival and growth.
  • A healthy working capital position ensures that a business has sufficient funds to cover its short-term obligations and invest in its operations. However, businesses may face challenges in maintaining adequate working capital levels.
  • Here are some ways to boost working capital:
    • Delaying payments to suppliers: Businesses can delay payments to suppliers to free up cash and increase their working capital. However, this approach may damage supplier relationships and lead to higher costs in the long run.
    • Negotiating better payment terms: Negotiating extended payment terms with suppliers can help businesses manage their cash flow and improve their working capital position. However, this may not be possible if suppliers are unwilling to agree to new terms.
    • Reducing inventory levels: Reducing inventory levels can free up cash and improve a business’s working capital position. However, this approach may negatively impact customer service and lead to lost sales opportunities.
    • Offering discounts for early payment: Offering discounts to customers who pay their invoices early can help businesses improve their cash flow and working capital position. However, this approach may impact profit margins.
    • Factoring: Factoring involves selling accounts receivable to a third-party at a discount to improve cash flow and working capital. However, this approach can be expensive and may damage customer relationships.
    • Improving accounts receivable management: Improving accounts receivable management can help businesses reduce the time it takes to collect payments and improve their cash flow and working capital position. However, this requires effective communication and relationship management with customers.

Business Studies

Discover more comprehensive and exam-focused ZIMSEC Advanced Level Business Studies Notes.

Get more notes