Managing a business in Rockhampton’s mixed economy can be tough, especially when cash flow is tight. That’s why managing your working capital effectively is so important. Working capital is all about having enough liquidity to cover short-term expenses while keeping your business ticking along.
Start with a Strong Foundation.
Your working capital ratio is your financial litmus test. It’s simply your current assets divided by your current liabilities. Aim for a ratio of at least 1, but ideally higher—around 1.5—so you’ve got a buffer during slower months.
Fine-Tune Inventory and Payment Strategies.
For Rockhampton’s agricultural and retail businesses, excess inventory is a cash-drain. Review your stock levels and optimise them using sales data. At the same time, talk to suppliers about extending payment terms. It might sound small, but even a few extra days can make a big difference to your cash flow.
Get Paid Faster to Keep Cash Flowing.
Encouraging early payments from your customers is one of the fastest ways to free up working capital. Consider offering discounts for early settlement or use automated systems to streamline your invoicing. Every day shaved off your collection period means more cash in the bank.
Plan Ahead with Cash Flow Forecasting.
Knowing what your cash flow looks like in the coming months can help you navigate Rockhampton’s ups and downs. Forecasting allows you to spot potential cash gaps and address them before they become problems.
Consider Financing—But Use it Sparingly.
Short-term financing can be useful for filling temporary gaps, but it shouldn’t be your go-to strategy. Focus on strengthening your working capital position so you’re not relying on loans to keep the lights on.
If you’re not sure whether your working capital strategy is on point, call J&T Accountants and Advisors today for a Business Health Check. Let’s make sure your cash is working as hard as you are.