How to Control Working Capital

Control the working capital is very important like control the car when you are driving. You can not break every time when you are driving the car but you know when, where and how to break the car to safe you and other. Like this, you also know when, where and how much working capital need and when you will satisfy same need of working capital for day to day operation of business.


So, if you do not know this knowledge. Come and learn from me.

1st Step : Estimate the Accurate Need of Working Capital

You must know annual and monthly need of working capital for business. This need can be estimated  with simple three methods which I have explained already. These are calculated on the basis of sale turnover method, cash budget method and operating cycle method.


2nd Step : To Plan to Acquire the Working Capital if Current Working Capital is Less than Our Need

If our need is Rs. 100 working capital but we have only Rs. 75 working capital for operation., we have to plan to get rest working capital.

For this,

We can plan to boost our sale

We can plan to increase sale quantity

We find new source of earning

We collect fast from debtors

We stop to buy new stock

We decrease to buy on credit


3rd Step : More Control on Inventory and Cash

There is more chance of loss by thief. So, we must record when buy, when sold and rest closing stock for find any cheating in it or natural loss. Like this, we also control cash by accounting its all receipts and payments.

Reference 

M.Com Financial Management Notes