The concept of working capital is as simple to understand as the subtraction or addition of numbers. It seems to be intimidating just because it is inclusive of business terminologies. Working capital is the amount left after the subtraction of the company's current assets from its current liabilities. For example: on March 1 a company's working capital would be 20,000 rupees if its current assets are worth 4,50,000 rupees and its current liabilities are worth 4,30,000 rupees.
The calculation and consideration of the working capital has a very vital role in business process improvement strategies and working capital reduction strategies.
Business Process Improvement
Whether it is a business environment or a person's lifestyle, it is ever changing in its nature. You must have witnessed this for yourself. When you were a kid yourself, there were different objects you had wished for and in present lifestyle, there are different objects that these new generation kids run after. Isn't this worth thinking upon? Even when we talk about the business environment, we may take a classic example of how people used to run the barter system followed by the trading system without even receiving a basic education. In the current situation, it becomes difficult to manage and develop a business even if one has a degree such as Masters in Business Administration (MBA).
Thus, in an ever changing lifestyle you must be capable enough to adapt to the change. In order to react and adjust to such a change, you must know the nitty-gritty of the organisation's workflow – everything from the place where you buy to the place where you sell your product.
A few qualities like the negotiation power, pitching ability, procuring style, market change predictability, keen sight on share fluctuations, and strong and effective financial planning, among others would surely put you at a better position than that of your competitors. You may also want to seek special advice from the agencies that provide business process improvement strategies.
Working Capital Reduction
As the term itself suggests, a firm could get on the verge of being handicapped of money if it is not able to manage its working capital. Reaching the perfect balance of the assets and the liabilities, as long as the company is getting profited, is every managers' dream goal.
The company should be able to satisfy the short term debts that are about to mature in the near future, and also be able to incur the upcoming operational expenses – such as the petty cash, legal fees, property taxes, advertising costs, travel costs, insurance fees and accounting expenditures among others, depending upon the nature of business.
Only if you are a master of working capital reduction strategies you must risk it upon yourself. Or else there are a plenty of agencies that take it upon themselves and give invaluable solutions that result in effective growth.
Reading this you must be empowered with the thought of either strategizing everything yourself or hiring specialists for business process improvement strategies and working capital reduction strategies.
Source : articlesbase.com
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