What are some techniques for better management of working capital?
Efforts to improve working capital revolve around two issues: processes and people. Regarding accounts receivable, the company should consider how it has communicated with customers. Are there different ways collection personnel might be able to converse with the customer to obtain payment? Would more frequent collection calls be appropriate, or are there other or better follow-up mechanisms? Perhaps stronger collections could be achieved through a third party. Also, the company should investigate its credit policies and procedures. Collections are generally quite difficult when the sale has been made to a customer with poor credit. Thus, prior to the sale, it is suggested that an entity perform credit checks on its customers. Another opportunity arises from strong inventory management, also known as supply chain management. Many companies have perpetual inventory systems that are not fully utilized. Not only will many of these systems provide basic inventory data, but they can also pr
