Title: 4 Tips for Effectively Managing Working Capital - SoftCo
Headings: 4 Tips for Effectively Managing Working Capital
4 Tips for Effectively Managing Working Capital
Blog - 29 Oct 2020
Benefits of Positive Working Capital
Improved Liquidity
Operational Efficiency
Increased Profits
Achieving the Correct Level of Working Capital
The State of Working Capital in 2020
Tips for Effectively Managing Working Capital
1. Manage Procurement and Inventory
2. Pay vendors on time
3. Improve the receivables process
4. Manage debtors effectively
Conclusion
Posted by
James Duffy

Content: Operational Efficiency
Optimum use of working capital management evades any future hindrances in business operations. A ‘safety net’ is available to protect against lack of production or delays in payments received. Increased Profits
A high level of working capital is only achieved when areas including Accounts Payable and Receivable are operating efficiently. In order for both departments to operate in an efficient manner, they need to ensure that they pay their vendors as per the agreed terms, which lead to the capturing of early payment discounts and increase the income of cash. Achieving the Correct Level of Working Capital
In spite of the importance of consistently maintaining a high level of working capital, it is also important to understand that there is a level considered ‘too high’. Having an extremely high level on an on-going basis can indicate that there is more money within the organization than is needed – that cash is not being invested correctly or company growth is being neglected in favor of high liquidity. The key is to consistently maintain positive working capital, but avoid reaching too high a level that leads to waste and inefficiency. Before undertaking strategical changes to effectively manage your working capital, it is worth taking a look at some current working capital trends in order to see where mistakes and gains have already been made. The State of Working Capital in 2020
According to PWC’s Working Capital Report , only 8 out of 18 sectors have shown improvements in working capital between 2019 and 2020. With many industries suffering from the effects of geographical areas moving in and out of varying levels of restrictions at different times, these figures could look very different next year, with even more industries seeing their performance deteriorate.