Components of Commercial Value Chain
February 12, 2025
More Losers than Winners The previous articles in this module covered the topic of globalization in depth. Some of the points of discussion were about how globalization has succeeded in lifting millions of people out of poverty. While accepting this fact, it is also the case that globalization has created income inequality which when coupled […]
Capability Maturity Models When organizations want to be certified for their quality or operational excellence, they usually turn to quality frameworks like Six Sigma, Kaizen, or TQM. These are just representative of the different quality and operational excellence models and there are many other frameworks as well. Similarly, there are process capability models like the […]
Buying a Desktop computer for your home or a Laptop for your use is very easy. You browse the internet to see the latest models and configurations, decide on your specific requirement and click to place an order. At times, of course, you might go into an electronic supermarket and check out the physical product […]
The Vikings were some of the most brutal people that the world has ever seen. The nations that they built were carved out of violence. However, their descendants have turned out to be the most caring and civilized people on the planet. Today, the Scandinavian way of life is a role model for the rest […]
Use of computer systems is a post second world war phenomenon. The first working computer was developed by two scientists at the University of Manchester, UK. However, commercial applications of computer commenced during the 1960s. Pre ERP systems In the sixties, computers were bulky, noisy and without the facility of standard operating systems. The organizations […]
Businesses require adequate capital to succeed in business environment. There are two types of capital required by business; fixed capital and working capital. Businesses require investment in asset, which has to be utilized over a longer period of times. These long-term investments are considered as fixed capital, e.g. plant, machinery, etc.
Another type of finance required is short term in nature. This short term finance or capital is required to undertake day to day operation. Such short capital is called current capital or working capital.
Working capital refers to company’s investment in short term asset such as cash, inventory, short term marketable securities and account receivable.
Information technology is playing a big part in today’s working capital management. Several aspects of working capital management like the cash management, inventory management, account receivables/payable management, etc. are managed through enterprise resource planning modules.
The cash management module within the working capital management system should be fully integrated with other modules like account receivable/payable, payroll and general ledger. The main features of cash management tools are as follows:
Inventory management and control module is utilized by companies to avoid product overstock and outages. There are several components of an inventory management tool such as order management, asset tracking, product identification, etc. The main purpose within the inventory management system is to reduce the overall costs of carrying. An inventory management tool helps in:
The main advantage of an inventory management tool is cost savings, increased efficiency, warehouse management, etc.
An account receivable management tool helps solve critical question like when payment is due, how much payment is due, etc. The main features of account receivable tool are as follows:
Appropriate credit policy is essential to maintain the cash flow cycle and return on capital.
Another important aspect of working capital management is short term financing. The short term financing tool based on cash flow cycle, inventory position and requirement helps in deciding the quantity of capital required. It also helps identify the term of financing and track payment.
Working capital management decision directly affects day to day business operations. One of the such factors is the cash conversion cycle which immediately affects the liquidity of the organization.
Your email address will not be published. Required fields are marked *