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Management Of Working Capital PowerPoint PPT Presentation


Working capital effective management naturally will lead to the generation of optimal cash amounts leading to reduction in risks and enhanced profits. Read more.

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Management Of Working Capital

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Management of working capital

Article1: Horizontech.com

Management Of Working Capital

Effective working capital management is crucial for smooth business operations. The flow of

cash happens in a cyclic format moving across the system. One can consider this as the

lifeblood of your business. In theory, it should generate a cash surplus, however, if this does not

happen, business eventually no longer has any cash and simply expires. The faster the

expansion of organization, the higher will be the cash and need related to investment and

working capital. The cheapest and fastest source of this cash interestingly lies within the

business itself in the form of working capital.

Working capital effective management naturally will lead to the generation of optimal cash

amounts leading to reduction in risks and enhanced profits. Holding stocks and providing

customer credits represent substantial portions relating to the total profits of the firm. Business

cycle consists of two vital elements namely:

A.Receivables: it refers to debtors that owe you money

B.Inventory: work in progress and the stock

Loans, equity, and payables remain the major cash sources. Different components associated

with working capital are two-dimensional - Money and Time being the two dimensions. The

faster the money moves across the cycle, the more will be the generation of business cash.

Movement of the money will become faster automatically as the businesses take steps to make

debtors pay up quickly. Also you can free the money by reducing the levels of inventory in

comparison to sales.

With ready availability of cash, you can invest in other aspects of business such as choosing the

services of a cloud service provider to improve operations. For funding the working capital, you

will have to borrow less than before. This in turn will also reduce bank interest rates. Take the

opportunity to negotiate with the suppliers. It will help you to increase your credit limits and

assure long credits creating free financial help find your future sales. Paying cash proves to be

quite tempting when available especially when purchasing fixed assets like vehicles, computers,

or plants.

But when you are paying cash it is important to remember that it will no longer be available for

use as working capital. When your business faces tight situation related to the cash, you are

better off with other means to finance the capital investment. This includes leasing, loans, or

equity. Those paying dividends with increased drawings, are dealing with cash outflows which

in turn removes the liquidity from business. Additional sources of working capital include:

existing reserves of cash

payables or supplier credits

secured cash or profits


Management of working capital

Article1: Horizontech.com

long-term loans

new loans/equity from shareholders

credit lines or bank overdrafts

Insufficient availability of working capital means you will be looking for ways to increase the

sales. This way, there is a high chance of overstretching business financial resources. Another

name for this is overtrading. It is important to understand the signs of this such as the pressure

on your existing cash.

You can now increase cash flow and ensure successful management of working capital across

your establishment through professional help from Horizontech.com

ABOUT THE AUTHOR

Tony Rogers is an expert in modern computing and related services who likes to write many

interesting articles and blogs, helping people to understand the nuances of the industry. He

recommends Horizontech.com as the best name to trust for the most reliable cloud computing

services.


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