How can I choose the best working capital policy?
It may be difficult to choose the best policy of working capital and policy that works best for another entrepreneur may not be the best for you. In general, however, the best policy of working capital, which has the level of risk you can handle. Conservative working capital policy may prove the best if you want to maintain a low risk. On the other hand, the corresponding working capital policy includes a mean level of risk, but also leaves you more money for reinvesting in your company. Aggressive working capital policy is considered to be the highest risk, but can be reflected in more funds that reinvest in your business.
The corresponding type of policy may prove to be the best choice if you want to have a significant amount of money to reinvest in your company, but you don't want to take an extremely high level of risk. With this policy, you will make sure that your business assets are associated with your business obligations. You are planningso that you have money to pay believers when your payments are payable, but in the meantime you can re -invest funds in the hope of increasing profits for your business.
If you prefer less risk policy, you can choose a conservative plan. In this case, you will usually match your business assets and obligations to make sure you have money to pay creditors. If you want to reduce the risk, you can also keep other assets for the purpose of unforeseen circumstances. Although you can prefer this policy of working capital because this includes a small risk, the choice of its can mean that you have less money to grow business.
Aggressive working capital policy can enable you to expand your business quickly, but involves taking a high level of risk. In this case, you collect funds that quickly your debtYou live, and postpone the creditors to pay as long as possible. With this plan, you can use the money you receive from debtors, and the money you owe to creditors to increase productivity and provide rapid business growth. This allows you to see an increase in sales and profits faster than usual. However, it can also force you to sell assets or look for other sources of financing if the creditor requires payment before you expected.