Working capital is also called "working capital".Foreign countries are called working capital.yesCurrent assets of joint venturesTotal minuscurrent liabilitiesAfter totalNet, that is, the enterprise can use and turnoverworking capitalNet.As working capital iscurrent assetsThe net amount after deducting current liabilities. Therefore, changes in current assets and current liabilities will cause changes in working capital.If the current liabilities remain unchanged, the increase of current assets means the increase of working capital;The decrease of current assets means the decrease of working capital.If current assets remain unchanged and current liabilities increase, it means that working capital decreases;A decrease in current liabilities means an increase in working capital.In the case of simultaneous changes, only the net amount after offsetting the two is the net increase or decrease of working capital.In general, only one party is involved in current assets or current liabilities, while the other party is involved inNon current assetsOr notCurrent liabilities (e.gLong term liabilities、long-term investment, capitalfixed assetsEtc.)Economic businessWill increase or decrease working capital.Both parties are involved in the economic business of current assets or current liabilities, that is, the business between internal items of working capital will not increase or decrease working capital.[1]
Working capital is the general term of current assets and current liabilities of enterprises.The balance of current assets minus current liabilities is called net working capital.Working capital management includesCurrent asset managementAnd current liability management.
Current assets refer to those that can be held within one year or moreBusiness cycleFor internally realized or used assets, current assets have the characteristics of short occupancy time, fast turnover and easy realization.Enterprises have more current assets, which can be reduced to a certain extentfinancial risk 。Current assets inBalance SheetThe above mainly includes the following items:Monetary capital、Short term investment、Notes receivable、Accounts receivable、Prepaid expensesAnd inventory.Current liabilities refer to the debts that need to be repaid within one year or more than one operating cycle.Current liabilitiesShort term financingIt has the characteristics of low cost and short repayment period, and must be carefully managed, otherwise, the enterprise will bear greater risks.Current liabilities mainly include the following items:Short term borrowings、Notes payable、Accounts payable、Wages payableTaxes payable and unpaid profits, etc.
The more net working capital, the less risk of non repayment.Therefore, the amount of net working capital can reflect repaymentfloating debtAbility.However, the net working capital is the difference between current assets and current liabilitiesAbsolute numberIf the size of companies varies greatly, the significance of absolute number comparison is limited.andCurrent ratioIs the ratio of current assets to current liabilitiesRelative number, excluding the impact of different company sizes, it is more suitable for comparison between companies and different historical periods of the company.
Working capital refers to current assets less current liabilities（Short term liabilitiesAnd so on).If current assets-current liabilities>0, then the corresponding "net current assets" areLong term liabilitiesAnd a certain share of investors' equitySource of funds；If current assets current liabilities=0, the funds occupied in current assets are current liabilities financing;If current assets current liabilities<0, current liabilities are financed by current assets andfixed assetsetc.Long term assetsJoint occupancy,SolvencyPoor.
2. Non cash working capital such as inventoryAccounts receivable, Short termsecuritiesIt is easy to realize, which is important for enterprises to deal with temporaryFund demandIt is of great significance.
3. Quantity hasVolatility。Current assets or current liabilities are easily affected by internal and external conditions, and the quantity often fluctuates greatly.
Working capital can be used to measure theShort-term Liquidity The larger the amount, the more sufficient the company or enterprise is prepared for payment obligationsSolvencyThe better.When the working capital is negative, that is, the current assets of an enterprise are less than the current liabilities, the operation of the enterprise may be interrupted at any time due to poor turnover.How much working capital of an enterprise is enough is the key to making decisions.If the value of solvency is converted into a ratio or ratio for comparison, a more meaningful conclusion may appear.
importance
Announce
edit
Working capital management is the management of current assets and current liabilities of enterprises.An enterprise must have an appropriate amount of working capital to maintain normal operation. Therefore, working capital management isEnterprise financial managementAn important part of.According to the investigation, the companyFinance Manager60% of the time is spent on working capital management.It can be seen that the core content of working capital management is toApplication of fundsandFinancingManagement of.
reason
Announce
edit
1. Working capital is too large,LiquidityStrong, descriptionAsset utilizationNot high;If the working capital is too small, otherwise the liquidity is poor, it means that there are many problems with current assets and the potential debt repayment pressure is high.
2. Working capital is too little, indicating thatInvestment in fixed assetsrely onShort term borrowingsSuch liquidity financing amount is high, and the operation may face certain difficulties.
To maintain normal operation, an enterprise must have a proper amount of working capital. To do a good job in working capital management, it must solve the problems of current assets and current liabilities.
Second, how should enterprises finance current assets, that isFinancingManagement of.Including management of short-term bank borrowings andCommercial creditManagement of.
It can be seen that the core content of working capital management is the management of fund utilization and fund raising, so as to maintain the reasonable and necessary structure or proportion between them and enhance the liquidityLiquidity。
Working capital refers to the current assets and current liabilitiesNetAt the same time, enterprises must abide by the above four principles when managing working capital, and working capital refers to current assets minus current liabilities（Short term liabilitiesAnd so on).
For temporary current assets, the policy uses temporary land current liabilities to raise funds to meet their needs;For permanent current assets andLong term assets, usingLong term liabilities、equity capital And voluntary debt raising to meet their needs (see figure below).Cooperative financing policy requires enterprises to temporarilyDebt financingThe plan is strict, and the cash flow is consistent with the expected arrangement.staySeasonalityIn the low ebb, enterprises shouldSpontaneous liabilitiesNoOther current liabilities；Only in the demand for temporary current assetsfastigiumEnterprises only borrow various temporary debts.This policy is based on the fact that assets and liabilities can be fully matched, which is obviously an ideal policy for enterprisesfund managementWorking capital raising policy with high requirements.
working capital
Advantages and disadvantages: it can reduce debt risk andCost of debtIt is an ideal policy with high capital use requirements for enterprises.
Features: use long-term liabilities, voluntary liabilities and equity capital to raise funds to meet the requirements of permanent current assets andfixed assets(collectively referred to as permanent assets, the same below) capital requirements;Use temporary liabilities to raise funds to meet the needs of temporary current assets.
(2) Radical financing policy
Under this policy, temporary liabilities not only meet the needs of temporary current assets, but also meet the funding needs of some permanent assets, as shown in the figure below.
As can be seen from the figure below, the proportion of temporary liabilities in all sources of funds has increased, and the capital demand of some permanent current assets is also met by temporary liabilities, which is of great risk.As the cost of temporary liabilities is generally lower than that of long-term liabilities andCost of equity capitalTherefore, under the radical financing policycapital cost Lower.If the enterprise can really achieve continuous useShort term fundssatisfyLong term fundsIt is good to need that, but in fact it is difficult to do so.Radical financing policy is a kind ofProfitabilityandRiskHigh working capital raising policy.
working capital
Advantages and disadvantages: high risk and profitability.
Features: temporary liabilities not only meet the capital needs of some permanent assets, but also meet the capital needs of financing temporary current assets.
If the enterprise abandons the above financing principle, it will use the long-term capital raised for partShort term assetsThe capital portfolio formed by the long and short capital ratio of this arrangement is a relatively conservative capital portfolio.Because some short-term assets and all long-term assets are usedLong term capitalTo accommodate another partShort term assetsuseshort-term capital To finance, the risk is small, butcapital cost If it is higher, the profit will be reduced accordingly.This is a working capital policy with low risks and returns (see figure below).
working capital
Advantages and disadvantages: low profitability and risk.
Features: temporary liabilities only need to finance some temporary current assets, while the other part of temporary current assets and permanent assets are funded fromLong term liabilities, Spontaneous liabilities andequity capital 。
The above three choices of enterprises mainly depend onEnterprise FinanceDecision makers and financial managersRisk attitudeAnd water management.Of course, if the enterprise profits,Repayment abilityStrong, high reputation, good relationship with creditors, can appropriately increase the proportion of short-term capital, but the enterprise'sStrain forceBe strong.[2]
Many enterprisesRealize profits. Sell more products, often on credit.One-sided pursuitSales performance, which may be caused by ignoring the management of accounts receivableManagement efficiencyLow.For example, the lack of control over the cash flow and credit status of credit sales and the failure to collect payment in time may easily lead to the phenomenon that the book profit is higher than the actual capital due to the default of payment.In this regard,Finance DepartmentIt is necessary to strengthen the control of credit sales and advance purchase business, and formulate corresponding accounts receivableAdvance paymentControl system, strengthen the management of accounts receivable, collect accounts receivable in time, reduce risks, and improve the enterpriseFund use efficiency。
Add value
Accounting profitIt is the result of matching the current income and expense cost.At any income level, enterprises should do a good job in controlling internal costs and expenses, budgeting, strengthening management and reducing unnecessary expenses, so as to improve profits and increaseenterprise value 。
increase of efficiency
financial managementWe should build a scientific forecasting system and conduct scientific budgeting from the perspective of the overall situation of the enterprise.The budget includesSales budget、Purchase budget、Investment budget, labor budgetExpense budgetThese budgets enable enterprises to predict risks, obtain various information about funds in time, take measures in time to prevent risks and improve efficiency.At the same time, these budgets can coordinate the work of various departments of the enterprise and improve the efficiency of internal collaboration. In addition, under the guidance of sales, expenses and other budgets, the sales department can also have a certain understanding of the market in advance, grasp market changes and reduce inventorymarket risk 。
Improve the system
Clarify internal managementresponsibility systemMany enterprises think that the collection of payment for goods is a matter of the financial department and has nothing to do with the sales department. In fact, this is a wrong view.In fact, sales personnel should be primarily responsible for collecting accounts receivable.IfsalesmanWhen providing goods for sale on credit, he should also be responsible for collecting accounts receivable, so he will treat each account receivable with caution.
Establish customersCredit fileThe enterprise should setRisk Management The risk controller is responsible forsupplier. Conduct in-depth investigation and filing of customers' credit conditions, andcredit rating Set to implement differentCredit policyReduce the risk of purchase and credit sale.The risk manager can assess the customer's credit rating from the following aspects:registered capital；Credit status of repayment;There is no record of being fined for tax arrears;Whether there is any arrears of payment to the supplier;Other enterprisesComprehensive evaluation。The risk manager shall report the situation to the general manager according to the inspection results, and then the risk manager and the finance department shalldivision managerAfter discussion, the manager of the sales department and the general manager determine the amount of credit to be given to suppliers and customers.If the amount of credit provided exceeds the approved amount, the salesperson must obtainFinance ManagerSpecial approval of risk manager and general manager.If approval cannot be obtained, the salesperson can only reduce the credit scale or give up this business, so that a large number of bad debts in sales can be controlled and risks can be reduced.
Strict controlCredit periodThe collection time of accounts receivable should be specified, and these credit terms should be written into the contract tocontract formConstrain the other party.If the other party fails toSpecified timeThe enterprise can take legal measures against the defaulting enterprise according to the contract and collect the payment in time.
Through credit discount, enterprises in arrears are encouraged to repay their debts within the specified time. The reason why many enterprises cannot repay their debts in time is that they can not get any benefits from timely repayment, and default will not have any impact.This situation leads to the low efficiency of enterprise accounts receivable recovery.In order to improve this situation, enterprises can take corresponding incentive measures to give certain credit discounts to enterprises that actively collect money.
Implement the approval system to implement different approval levels for different credit scales and credit objects.Generally, a three-level approval system can be set.fromsales manager、Finance ManagerAnd Risk Administrator, General ManagerThree level audit。If the sales department adopts the method of credit sale, the financial department should firsteconomic interestAnd resultingCost riskIt shall be measured and submitted to the General Manager for review when feasible.This can improve the efficiency of decision-making and reduceenterprise operation Risk.
Strengthen remedial measures In case of default of payment for goods, the financial department should ask the sales staff to speed up collection of payment for goods, and the risk manager should reduce the credit rating of the enterprise;If the default is serious, the sales department shall order the sales personnel to cancel the purchase and sales business with the enterprise.
The establishment of enterprise internal control system mainly includes inventoryAccounts receivable, cashfixed assets、Administrative expensesAnd a series of control systems.Those who violate the control system shall be punished by the relevant responsible person.Strictly control expenditure and adoptPlanned cost accountingStrict measures should be taken for all kinds of expenses that are easy to wastecontrol measures 。For example, many enterprisesBusiness entertainment expensesIt accounts for a large proportion of the management expenses, leading to the collection of some entertainment expensesincome taxCannot be fully paidPre tax deduction。In this regard, the enterprise should require the sales staff to control the entertainment expenses, and the financial department shouldsales revenueCheck and approve the appropriate standard of entertainment expenses.
In a word, working capital management plays an important role in enterprise sales and purchase business, which will producesignificant impact 。Working capital managementIt should be a control over sales rather than a restriction. Its purpose issales promotionDepartment decreaseSales riskAnd improve the profit level.Therefore, business leaders should attach importance to the capital of enterprisesOperation managementWork.
