How can SMEs Optimize and Improve Working Capital?

Raj appeared worried as he pressed his knuckles to his face. He said to our sales team personnel,

“We work with limited resources and database management, account maintenance, marketing, planning, and scheduling need primary focus day in and day out. We need to take care of taxes, legal matters and need a steady flow of funds to business to deal with the daily expenses, liabilities, and operation cost…”

Mr. Raj is an SME Business owner based out of Bangalore. He added after a little pause as he sipped a glass of water,

“We have tried out and juggled with multiple platforms like the payment gateways, net banking, database management software, accounting software, supply chain ERPs, social media, and several communication channels for business and accounting processes. However, we have suffered huge losses as we often struggle to collect payments and payout on time. improve working capital is difficult as we fail to reconcile accurately most of the time and there are cases of bad debts.”

This is the story of most micro, small and medium enterprises, start-up firms, solopreneurs, and entrepreneurs. Any business, irrespective of its volume across all verticals, needs the support of the right business tools to improve working capital efficiently and get rid of the cash crunch. An efficient, affordable, and young digital Fintech, like Hylobiz, can technically strengthen the working capital of any business.

To know more, read till the end.

Let us, deep dive.

What is working capital?

Working capital is a financial metric that is obtained by measuring the difference between current assets and current liabilities. It indicates the operational liquidity level of a business for managing regular expenses.

Working capital= current assets- current liabilities

Why is Management of Improve Working Capital?

Management of working capital aims at maintaining cash flow to satisfy a short-term debt and operational expenses.

Working capital deficit indicates that the payables or liability to pay out to vendors may have exceeded the amount collected and hence affects its operations.

The higher the Improve Working Capital, the higher is the operational and functional efficiency of a firm. A very high networking capital enables a business to meet all its short-term obligations. Therefore, optimizing working capital is of utmost importance.

Challenges faced by SMEs: The SME sector is ever-growing and highly prospective, but they face strong competition and must manage the mammoth tasks with limited resources. The dearth of information regarding finance and account management is faced by many. Lengthy cash cycles and sometimes non-payment or delayed payments from clients/ customers cause cash deficiency to run the immediate operational expenses.

How can SMEs deal with their working capital efficiently?

SMEs play a very important role in the Indian economy. It is essential to carefully optimize and improve working capital. The working capital requirement may vary among firms, but efficient tools may help improve working capital effectively.

Hylobiz is a Fintech offering connected ERP and connected banking and facilitates complete digitization of your accounting system, faster payment, and collections, ensures quick settlement and automated reconciliation, and will enable you to avail loans. (Read till the end to know more).

The automated platform SMEs optimizes and improve working capital of SMEs, corporates, and other businesses and keeps cash flow problems at bay.

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Features on Hylobiz optimizing working capital:

  • With connected ERPs and digital ledger, there is no need of manual data entry. You can integrate your existing ERP seamlessly. Financial records get tracked accurately.
  • You can monitor receivables and payables accurately with the help of real time dashboard and can get paid or pay out right amount accurately on time.
Figure 1: Real-time Dashboard
  • Quick settlements and automatic reconciliation enable accurate tracking and maintenance of transactions and ensures no loss due to delayed payments and frauds.
Figure 2: Reconciliation Report
  • Hylobiz offers free subscription for lifetime and offers low transaction cost. You need not hire a CA to manage your audit trail. The digitization of account ensures no paper, printing, and mailing expenses. This reduces the cost of accounting and operations.
  • You can create/ upload/ send/ manage invoices, attach payment links and get paid through multiple modes. The automated reminders can be sent out to get paid well on time. As you are paid faster you always have a flow of fund to manage operational expenses well.
Figure 3: Configure Reminders
  • You can pay out to vendors on time and build a better relationship with automated reports. This enables you to grow your business with steady supply of goods and earn consistent profit. You get a good flow of cash to manage regular expenses well.
  • The connected ERP and connected banking enable Hylobiz to provide invoice discounting and loans to businesses. Invoice discounting and loans can make your business financially equipped enabling SMEs to get liquid cash and enjoy better working capital level to meet operational expenses. Invoice discounting allows you to avail loan against a certain percentage of outstanding invoices (accounts receivable). The real time dashboard and automated reports on Hylobiz platform display the accounts receivable (outstanding invoices) status which can be used as a collateral for loans from any Bank or NBFC and clearly prove that a business is running smooth and is not a fraud business. Before lending out the payables’ status can be examined by the banks from the report and dashboard to understand the liability status of the firm. The automatic reconciliation and transaction history available on the platform proves that your business is running healthy and helps in availing loan.
  • Hylobiz has partnered with multiple banks and NBFCs. The alliance with Bajaj finance and Neogrowth enables Hylobiz to offer SME working capital loans in months to come.  

Ask for a free demo.

You may read our article to understand how is working capital important for a business and how businesses and professionals can manage their working capital efficiently.

Hylobiz offers Faster Cheaper Easier Access to working capital. You can manage accounts and inventory, get paid faster, payout on time, and build stronger business relations to get a consistent flow of cash to the business.

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