What is it?
Managing the company’s operational liquidity and efficiency.
How does it work?
Working Capital Management refers to the process of managing the company’s operational efficiency and liquidity. It includes the administration of the company’s current assets and current liabilities.
When is it useful?
In the business context, Working Capital Management is crucial as it enables a company to handle its short-term expenses and obligations effectively. It involves managing cash, inventories, accounts receivable, and accounts payable. The goal is to ensure that the company has sufficient cash flow to meet its short-term debt obligations and operating expenses.
Real-World Impact
Consider the case of a manufacturing company. It needs to have a proper balance of raw materials, work-in-progress, finished goods inventory, and its accounts receivables and payables. If the working capital management is ineffective, the company might face a cash crunch, unable to meet its short-term liabilities. Hence, the company periodically reviews its inventories, receivables, and payables to ensure smooth operations.
How to Get Started
Understanding Working Capital Management can be beneficial when using Empress’s suite of tools and services. Empress provides tools that can aid in efficient management of inventories, receivables, and payables, thus enhancing the operational efficiency and liquidity of the business.
Get the Empress Edge
Effective Working Capital Management not only ensures smooth business operations but also contributes to a company’s profitability and stability. It involves making strategic decisions about inventory management, credit management, cash management, and short-term financing.