Working Capital Management Basics for Small Businesses

Published: 01st June 2010
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Ensuring adequate business cash flow has become a higher priority for most businesses because of declining sales occurring simultaneously with decreased bank financing availability. As a result many commercial borrowers are juggling the timing of their expenditures to match commercial income whenever possible. Because this is not an ideal solution under any circumstances, business owners will realistically be forced to "get back to working capital management basics".

Some common advice for many complicated problems is often a variation of "it is time to get back to the basics", and working capital options represent an ongoing illustration of this wisdom for small businesses. Working capital management is the science and art of short term business cash management, and improvements in this area should always be welcomed by commercial borrowers. Increasingly limited working capital loan options represent one of the best current examples of why it is so important for small business owners to place a high priority on "getting back to the basics". A simple common sense solution will often be more effective than a complicated approach when businesses are faced with difficult financial circumstances.

A primary alternative for any business to explore in their efforts to deal with a mismatch of income and costs is business expense reduction, and credit card processing is always a significant cost to evaluate. This is frequently an expense area that is overlooked because the credit card processing provider was chosen for convenience or perhaps because they were recommended by a banking or other professional relationship. This process should involve the close involvement of a business financing expert who is familiar with all aspects. One of the most practical methods for reducing this cost is analyzing alternative providers in conjunction with obtaining a merchant cash advance. Two cash flow benefits can be achieved by receiving commercial financing while simultaneously reducing a major cost by combining efforts to obtain additional working capital (via a business cash advance) with a change of processing services.

Looking at whether it is feasible to decrease overall bank financing is certainly a potential cost reduction that should not be overlooked. Many banks are increasing their fees for almost all small business financing services. To avoid some of the inflated bank fees altogether, businesses should increasingly try to reduce their business debt levels. When this is not practical, the option of firing a current bank and replacing them with a new bank charging more reasonable fees will need to be seriously considered.

As small businesses will quickly realize when they review business loan and working capital management basics, during the past few years the most effective business financing options sources have changed. Primarily because the active role that banks have traditionally played in providing both working capital loans as well other forms of commercial loans has been quietly stopped or significantly reduced, commercial borrowers might need to be alerted that there are both "new basics" and "old basics" for most commercial financing situations. Small business financing can no longer be taken for granted by any business owner because of the recent ineffectiveness that prevails with commercial banking. While a traditional bank solution will generally involve taking on more business debt to resolve financial problems, a process of reviewing "working capital basics" should help businesses determine if other commercial finance options might be more effective in resolving a current predicament.
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Stephen Bush has developed practical solutions for working capital management problems. To learn more about his current recommendations, small business owners should contact Steve at AEX Commercial Financing Group to receive a straightforward review of realistic options for business cash advances and small business financing.

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