Cash Flow is King: 7 Working Capital Strategies That Transformed Our Clients

Cash flow is the lifeblood of every business. You can be profitable on paper and still run out of cash. Here are 7 working capital strategies that have transformed businesses we work with at Legal Artha.

1. Compress Your Receivables Cycle

The average Indian SME has a receivables cycle of 60–90 days. Through structured invoicing, automated reminders, and credit policy redesign, we have helped clients bring this down to 30–40 days — releasing massive amounts of cash trapped in the business.

2. Extend Payables Without Damaging Relationships

Not all payables need to be paid in 30 days. With proper vendor relationship management and supply chain financing, you can extend payment terms to 45–60 days without penalties — improving your working capital cycle significantly.

3. Optimise Your Inventory Turnover

Excess inventory ties up capital. Through demand forecasting models and ABC analysis, we identify slow-moving and dead stock, and restructure procurement cycles to match actual demand.

4. Deploy Idle Cash in Short-Term Instruments

Most SME promoters let surplus cash sit in current accounts earning zero returns. Even conservative short-term liquid funds can generate 6–7% returns — improving overall capital efficiency.

5. Reduce Your Cost of Capital

By restructuring the debt-equity mix, negotiating better working capital loan terms, and accessing government-backed credit schemes like CGTMSE, we have helped clients reduce their cost of capital by 20–30%.

6. Implement Cash Flow Forecasting

A 13-week rolling cash flow forecast is a game changer. It eliminates surprises, helps you plan funding requirements in advance, and gives lenders confidence in your financial management.

7. Set Up Credit Policies for Customers

Without a formal credit policy, sales teams extend unlimited credit to keep customers happy — at the cost of the company's liquidity. A well-designed credit policy protects cash while maintaining healthy customer relationships.

Implement these 7 strategies and watch your working capital efficiency transform. We can help — call +91 87620 94818.