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
