Q: How can I enhance my working capital?

A: Working capital is the difference between your current assets and current liabilities. Obviously, the assets should exceed the liabilities-if not, your business is in trouble.

The key to a good working capital position is to keep the timeframe for collecting your receivables to a minimum and manage your trade credit terms to the max. You need to analyze how profitable your business is (and how profitable it could be), how quickly you collect receivables, and how long you take to pay vendors. If you have inventory, you should also look at how much money you have tied up in inventory and calculate the turnover rate.

For example, if you allow your customers and clients to take up to 60 days to pay you, but you pay your vendors in 30, you’re unnecessarily restricting your cash flow. You can increase your working capital by synchronizing your accounts payable and receivable and by making your business more profitable.