12 Ways to Manage Working Capital – Business Acumen 101
Today we look at 12 ways to manage working capital. These methods can be used internally by managers looking to improve their productivity or unit performance. Externally, B2B sales people can look for ways their products or services can produce these advantages for their customers. The key is to review the lists and find one that makes sense for you. Then take that one method – launch and measure your results.
Working Capital is one of the key factors in financial management and is one of the things that managers and sales people need to understand. The dozen methods I’m sharing with you today represent both basic and high level methods or decisions to be made for a company to improve their working capital position.
Remember that Working Capital is about cash and near cash that is available for the company to use during their normal operations. Think about the net cash available to use over the cash needed for basic operations and capital investments.
So here are the 12 ways to manage working capital:
- Reduce number of types of items in stock.
- Speed up production process. (Cut sets in production process)
- Increase process efficiency to decrease scrap/ damaged / or unacceptable work.
- Use large-supplier’s credit department to obtain optimal bank interest rates.
- Make secured short-term loans of excess cash.
- Speed up disposal of slow-moving inventories including obsolete inventories.
- Establish most economical production or ordering points.
- Combine two or more operations.
- Correlate forecasting data between marketing and production.
- Shift burden of carrying inventory to suppliers.
- Shop market for optimal supplier quality, delivery, and cost.
- Control additions of new items to stock.
The question you need to ask is “How can I maximize the working capital?” The answer to this question is what will make a difference from you focus on one of the 12 methods listed above. Launch and measure results – you will see the results and others will too.
For more understanding of the manufacturing process we offer two business simulation processes – a two day process where you run a manufacturing business for 8 years over 2 days and learn about the effects of over 1500 strategic decisions. The other is a one day process – Manufacturing Reality Cash Flow. This process teaches the basics of cash flow understanding. Call us to get more information on these outstanding processes. Our phone number is 901.757.4434.
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Voss Graham
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Tags: Business Acumen 101, cash flow, Manufacturing Reality, working capital
