Optimizing Working Capital Management from Processes Perspective
Vuorikari, Maija (2012)
Saimaan ammattikorkeakoulu
2012
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2012121719822
https://urn.fi/URN:NBN:fi:amk-2012121719822
Tiivistelmä
The purpose of this thesis was to study working capital management methods in the case company and find ways to improve them. Analyzing current situation gave direction to what kind of plans have to be done to free tied-up capital. The aim was also to create new rules and policies for routine work. Main research question for this thesis was “How should processes be enhanced to improve working capital management?” In order to answer the research question the current economic situation and the existing processes were analyzed to understand and find the best ways to optimize working capital management. Defining the current situation formed two sub questions which were: What is the current situation of working capital management in the case company? What are the factors affecting working capital?
Research was carried out using qualitative research methods. A consulting company was hired by the case company to conduct a working capital project, a part of a larger project to which this thesis also contributed. The theory base for this study was gathered from literature, articles, the Internet, and from the case company’s internal reports. Data for some internal reports were collected by the consulting company. Most of the information concerning the case company was declared confidential because it contained key figures. Working capital was studied from the operative point of view; financing was also probed briefly.
Based on the findings of this study it was concluded that working capital management can be improved by many actions with little effort, however, seeing the impact of the actions taken is a further study to carry out. The most important processes determined in the thesis needing reformation were invoicing, purchasing, and credit management. The findings suggest that faster invoicing and short payment terms reduce the length of receiving the payment from the customer. Negotiating longer payment terms and bigger order sizes are important in the purchasing process. It was also discovered that collecting and checking credit rating minimizes the risk for bad depts. In the case company working capital project ends in December 2013, so the final results of the project were not studied in this thesis.
Research was carried out using qualitative research methods. A consulting company was hired by the case company to conduct a working capital project, a part of a larger project to which this thesis also contributed. The theory base for this study was gathered from literature, articles, the Internet, and from the case company’s internal reports. Data for some internal reports were collected by the consulting company. Most of the information concerning the case company was declared confidential because it contained key figures. Working capital was studied from the operative point of view; financing was also probed briefly.
Based on the findings of this study it was concluded that working capital management can be improved by many actions with little effort, however, seeing the impact of the actions taken is a further study to carry out. The most important processes determined in the thesis needing reformation were invoicing, purchasing, and credit management. The findings suggest that faster invoicing and short payment terms reduce the length of receiving the payment from the customer. Negotiating longer payment terms and bigger order sizes are important in the purchasing process. It was also discovered that collecting and checking credit rating minimizes the risk for bad depts. In the case company working capital project ends in December 2013, so the final results of the project were not studied in this thesis.