Working Capital and
Cash Flow Management
Cash being a very important part of the working capital besides the other current assets (mainly trade receivables & inventories) and current liabilities (mainly trade payables). To manage cash it is imperative to efficiently manage the trade receivables and the trade payables.
In simple terms an efficient working capital management ensures that the business has sufficient cash at all times to pay to the suppliers, repay debts when due and pay for other current liabilities, thus ensuring smooth running of operations.
Efficiency in cash and working capital management is achieved by applying a set of policies and tools as applicable to management of trade receivables, trade payables, inventories and debts repayment. Besides, a sufficient amount of surplus/reserve cash should always be available after taking care of current liabilities to manage unanticipated, important and urgent needs of the business.