Working Capital Management

Your own liquidity source for growth financing

Working capital management (the management of inventories, receivables and accounts payable) and its fine-tuning is a key variable that businesspeople can use to unlock liquidity for internal financing.

 

The greatest potential for improvement lies in reducing a company’s inventories, closely followed by optimizing its receivables management processes.

Because SMEs’ ability to meet their financial obligations is closely tied to their own customers’ payment habits, sustainably improving their receivables management processes and optimizing their accounts payable arrangements must become top priorities. In an ideal world, companies would by paid their outstanding receivables as soon as possible, while appropriate reductions for prompt payment, or extended grace periods on attractive terms, would be granted for their accounts payable.

Active receivables management helps hedge the risk of bad debt; at the same time, viability checks conducted before contractual conclusion improve the quality of the open receivables – and, thereby, the prospects of them being honored.

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