Allianz Trade Outlines Strategies for Improving Business Working Capital

Allianz Trade, a global leader in trade credit insurance and risk management, has published a guide outlining seven key strategies for businesses to improve their working capital. Working capital is defined as the funds available to meet a company's day-to-day financial obligations and maintain its operating cycle.

The guide addresses the challenges businesses face in managing liquidity, noting that insufficient working capital can hinder growth opportunities and disrupt operations. It highlights that traditional methods, such as using accounts receivable as collateral, are becoming more complex.

Among the recommended techniques is shortening the operating cycle, which can be achieved by requesting deposits, upfront payments, or reducing credit terms extended to customers. The guide also advises against financing fixed assets, like property or equipment, with short-term working capital, suggesting long-term loans or leasing as more appropriate alternatives.

Furthermore, the publication emphasizes the importance of conducting credit checks on new customers to mitigate default risks. For international trade, it recommends utilizing expert risk analysis to assess country-specific economic and political factors. Allianz Trade also promotes trade credit insurance as a tool to protect businesses against non-payment of accounts receivable, thereby securing cash flow and earnings.