Article by Ajaero Tony Martins
Working capital management can be defined as the process of managing short term or current assets and short-term or current liabilities. Short-terms assets are composed of loans and advances, inventories, investments, debtors and cash and bank balances. On the other hand, short-term liabilities have the following components: trade advances, creditors, provisions and borrowings. It is advisable for you to effectively manage it so as to ensure that you minimize risks and that you continue to become profitable.
Working capital, which can be defined as the available cash on hand for the daily operations of your business, can actually be affected by a number of factors. These factors include external issues such as the business and legal environment and internal mechanisms such as information systems and organization structures. Undue focus on the task of producing good quarterly sales results can also be expected to have a huge impact on it. It can negatively affect your working capital performance. If the operations of your company have marked seasonality and your working capital requirements vary from one quarter to another, then there is also a great chance for your working capital performance to be negatively affected.
» Read more: The Basics of Effective Working Capital Management
