working Capital management

1. Working Capital Management
By
Soorya Mohan E

2. What is working capital ?
Working capital is known as the capital that a company uses or
requires to finance its day-to-day operations. Working capital is a
financial metric that is the difference between a company's curent
assets and current liabilities.

3. Working Capital Management
Working capital management is a business process that helps
companies make effective use of their current assets and optimize
cash flow. It’s oriented around ensuring short-term financial
obligations and expenses can be met, while also contributing
towards longer-term business objectives. The goal of working
capital management is to maximize operational efficiency.

4. Objectives of working Capital Management
• Meeting obligations: Working capital management should always ensure
that the business has enough liquid assets to meet its short-term
obligations,
• Growing the business: With that said, it’s also important to use your short-
term assets effectively, whether that means supporting global expansion or
investing in R&D.
• Optimizing capital performance: Another working capital management
objective is to optimize the efficiency of capital usage – whether by
minimizing capital costs or maximizing capital returns.

5. Strategies for optimising working Capital
• Inventory management
• Cash flow management
• Account receivable management
• Account payable management

6. Inventory management
Inventory management involves overseeing and controlling the
ordering, storage, and use of materials and products within an
organization. It ensures that the right amount of inventory is
available at the right time, in the right place, and at the right cost.
Effective inventory management helps minimize costs, optimize
stock levels, and improve customer satisfaction.

7. Cash flow management
Cash flow management in working capital management focuses
on ensuring that a company has sufficient liquidity to meet its
short-term obligations and operate efficiently. It involves
managing the components of working capital, which include
cash, accounts receivable, accounts payable, and inventory.

8. Account receivable and accounts payable
management
• Accounts receivable management involves overseeing and handling the money that
customers owe to a business for goods or services that have been delivered but not yet
paid for. Effective management is crucial for maintaining a healthy cash flow and
ensuring that a business has the necessary funds to operate and grow.
• Accounts payable management involves the processes and strategies used by a
company to manage its obligations to pay off short-term debts to its creditors or
suppliers. Effective accounts payable management ensures that a company maintains
good relationships with its suppliers, takes advantage of payment discounts, avoids late
fees, and maintains a healthy cash flow.

9. Thank you