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: Managing working capital effectively should therefore be a top priority for CFOs, now, more so than ever. First, let’s look at the key benefits of positive working capital for organizations. We will then delve into some of the working capital trends emerging from 2020 before highlighting 4 keys tips for managing working capital in 2020 and 2021. Benefits of Positive Working Capital
Improved Liquidity
By obtaining a consistently high level of working capital, organizations ensure that adequate cash levels are available for any potential upcoming opportunities or unanticipated scenarios. It also gives organizations more flexibility over how they run their operations, which enables them to fulfill customer orders, expand and invest in new products at a faster rate. 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’.