Your company will need to understand what its available current assets and liabilities are, and how to manage them to successfully fund operations and optimize profitability. Working capital management is the answer to this need.
A well-managed business tracks and measure performance based on metrics. Working capital management helps you to understand how your business is operating and performing. Utilizing metrics like Net Working Capital (accounts receivables + inventory less current liabilities) assesses the overall liquidity of a business by determining how much cash will be available
Cash flow analysis and forecasting are part of your overall working capital management plan. Without knowing your current cash situation and anticipated receivables, you are not able to get an accurate picture of exactly how much cash you need to keep going.
You will also be able to use working capital analysis to make calculated decisions with capital improvements to your business that will result in increasing your liquidity, which will, in turn, ensure funding for operations without worry.
Making sure that you have the capital and liquidity needed to meet obligations and fund operations, while still keeping an eye on profitability, is the hallmark of working capital management. You can’t do it all alone, so be sure to hire a company with experience in this type of management who can handle all of your cash flow forecasting and investment strategies.