Unlock Working Capital To Increase Your Valuation
Buyers pay a valuation premium for companies that have better cash flows, argues Divestopedia. And you can improve the valuation of your business by getting a better grip on your working capital.
They provide four ways management can release working capital
– being disciplined when granting credit
– turning work into invoices and billing customers earlier
– improving on collection times and keeping a tight control of accounts receivable
– delaying payment of bills till the last possible day.
Cash is king. Value creation starts with revenue growth and profitability, but it doesn’t end there. You need to take that revenue and turn it into cash. Buyers always look at a company’s ability to generate free cash flow, which is significantly impacted by the changes in net working capital. Therefore, the better you are at keeping cash inflows from reducing your working capital, the more attractive your company will look.