Working Capital - an effective tool for judging the efficiency of your company

Financial management can be divided into asset management, namely the investments and liabilities, ie sources of funding. It is a common belief that the resources of an enterprise can not be maximized in the long term unless it survives initial hiccups. It 's also common that an undertaking fails more often because they are unable to meet their working capital requirements and, consequently, sound working capital management is a prerequisite for survival.

What affects the working capital management:

Generally, organizations are more focused on cash and supply chain issues. On the other hand, the external problems such as legal or domestic issues such as organizational structure and information system can significantly affect the working capital.

Due to market pressure, companies are misled to pay a lot of attention to the presentation of good quarterly results month after month. Undue attention to this problem can sometimes lead to flattering but inaccurate picture of performance in working capital.

Measures to improve working capital:

A correct prediction of cash flow is the main problem of effective management of working capital. This should take into consideration the impact of unforeseen events, market cycles, loss of customers and the strategies adopted by competitors. The effect of unanticipated requests on capital should be taken into account inches

There are some advantages of working capital on an enterprise basis. Cash flow at a point can be well used in another. For this to happen effectively, good links between production and billing, the internal flow of best practices in cash and cash should be in place.

Executives at the highest levels as it is right to set target levels and performance. This is necessary and will help identify and implement strategies to generate cash in the short term.

System management disputes in a society should be especially effective in relation to customers. This is necessary to leave money otherwise blocked due to disputes. It will also improve customer relations and free up legitimate activities such as sales and cash receipts.

Thus, working capital is an important tool for measuring the operational and financial efficiency of a company. This aspect must be incorporated in strategic thinking and operating companies. Efforts should always be done to improve the working capital of the company, which in the long run, would grow into a better relationship with the customer .......