How can companies optimize working capital?
Working with your financial service provider to structure solutions to get working capital at competitive rates is paramount. For example, there are various financing programs sponsored by the government, such as the Working Capital Guarantee Program offered by the Export-Import Bank of the United States. The Working Capital Guarantee Program provides loan guarantees to banks willing to lend to exporting companies. The loan guarantee is secured against foreign accounts receivable, raw materials, work-in-process and finished goods inventory destined for export. Additionally, when looking to optimize working capital, most companies think of days sales outstanding (DSO), which measures the time it takes a company to collect accounts receivables from credit sales. DSO is one of the best measures to determine receivable efficiency — the lower the DSO, the more efficiently a company manages cash flow. For example, some companies require letters of credit from their global customers. The lett
