Application of working capital management generally refers to the effective preparation of the statement that shows the cash flow in and out of a business. Also referred to as the funds statement, the application of working capital allows business owners to analyze the profitability of a company. Most of the information needed to prepare a funds statement for a specific time period can be found in the Statement of Retained Earnings, Balance Sheets, and the Income Statement.
Effective management of the application of working capital begins with preparing the statement by recognizing the sources and uses of the business’s capital. Sources include personal and private investments, loans, cash advances, and leases. Uses of capital, also known as operating expenses, consist of salaries, supplies, inventory, and payments on rent, loans, and leases. It is a smart idea for a business to make sure it is prepared for any unexpected cash shortage. Subtracting the total use of funds from the total supply of funds determines a business’s working capital available.
Another effective tool used to manage the application of working capital is investing in accounting software or hiring an experienced accountant to ensure that financial records are correct and current. The manual method of inputting, editing, and managing financial data is prone to various errors that are easily overlooked. There are many types of financial software available that range in prices and features depending on what a business needs.
Improve company revenue refers to a variety of solutions and strategies a business can use to increase its income. Because the majority of a business’s revenue is generated by sales, business owners tend to focus on ways to improve sales.
Businesses can improve company revenue by changing the way they handle customers. Many companies offer small discounts to customers who pay off their accounts within a short time period. Businesses can also charge late fees to clients who fail to pay their accounts within a given time period. These strategies give customers an incentive to pay as soon as they can, which leads to increased revenue.
Many businesses improve company revenue by advertising to increase their potential customer database. The most common advertising venues for small businesses are billboards and newspapers. Businesses willing to spend a little more money can also advertise via television and radio. Start-up small businesses usually begin their advertising with business cards, flyers, and local newspaper ads that are less costly than other forms of marketing.
Another way to improve company revenue is to create and maintain a website for the business. Many web hosting providers offer affordable monthly plans for entrepreneurs. These packages include easy-to-use publishing software and tools to increase traffic to the site. Businesses may also be able to sell their products online and earn revenue from ad clicks. Ad click programs are offered by Internet companies that place relevant ads on a site. Then, when a visitor clicks on one of the ads, the business gets a certain percentage of what the ad is worth.