Working capital management Strategies

Working capital management refers to the management of a company's short-term financial resources, including cash, accounts receivable, inventory, and accounts payable. It is an important aspect of financial management, as it affects a company's ability to meet its short-term obligations, maintain an adequate level of liquidity, and operate efficiently.

There are several strategies that companies can use to manage their working capital effectively. These strategies include:

Managing accounts receivable: 

This involves setting payment terms and policies, monitoring customer payment patterns, and using tools such as factoring or invoice financing to manage the flow of cash in and out of the company.

Managing inventory: 

This involves optimizing inventory levels to ensure that the company has enough stock to meet demand, but not so much that it ties up excess capital.

Managing accounts payable: 

This involves negotiating favorable payment terms with suppliers and using tools such as supply chain finance to manage the flow of cash in and out of the company.

Managing cash: 

This involves forecasting cash needs, managing cash balances, and using tools such as short-term borrowing or cash management accounts to manage the flow of cash in and out of the company.

Overall, effective working capital management is critical for the success of any business. It allows companies to meet their short-term financial obligations, maintain an adequate level of liquidity, and operate efficiently.

Ahsan Tariq

Department of Management Science 

Preston University