Cash flow and working capital management

The efficient management of working capital

More cash funds through working capital management​

The efficient management of working capital may bring even considerable changes to the amount of money available to the company. Used correctly, it can have a major impact on the company’s operations.

Working capital means the amount of money tied up in the company’s business operations. Working capital management refers to funds that will be realized in the company’s cash in the future but which are currently tied up in receivables or used for purchases that will create revenue. Payments have, therefore, already been made to suppliers before the payments for the sales of purchased goods have been received. To put it simply, we can think of the monetary relationship between accounts payable and sales receivables.

Working capital affects the short-term liquidity of the company in every way. It depends on the amount of money realised as cash which invoices can be paid, which investments can be made at the moment, how much debt can be repaid and how much money can be paid out to shareholders. Even if there is a large amount of future money in sales receivables, it cannot be used for purchases and other expenses before it is realised as cash. Large, positive changes can be made here by effectively managing the existing working capital.

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How to enhance working capital management?

The amount of money available can be increased by planning the flow of money tied up in receivables and purchases. In fact, business managers should focus on negotiations with suppliers and customers on terms of payment.

Working capital management is also enhanced by skilful forecasting. To be able to use the released funds sensibly, forecasting of business operations must be up-to-date and as precise as possible. So, resources should also be invested in effective forecasting. Business managers should regularly pay attention to the amount of current assets as well to avoid it growing to an excessive level. Unnecessary current assets also take up valuable working capital.

Working capital management can be enhanced through the following actions:

  • Negotiate longer payment times for purchase invoices.
  • Shorten the payment times in sales agreements.
  • If necessary, use factoring services
  • Adjust the payment time for taxes
  • Make a change application for tax prepayments
  • Make use of old losses
  • Lengthen the accounting period

Strong expertise - Meet Staria's professionals

Staria's team of +20 professionals have solid know-how and years of experience in cash flow and working capital management. Our specialists are e.g.

Juha Kiljunen

Juha Kiljunen
Director, CFO Services

Juha has 30 years of experience in CFO work. He has worked for Finnish and international publicly listed and unlisted
group companies. For the past 10 years, he has helped customers with financial management services in the area of financial accounting and cost accounting as an Interim CFO. Long-term financial management and various financing arrangements and corporate restructuring operations are his areas of strength

Tuomas Lehto

Tuomas Lehto
Senior Financial Consultant

Extensive experience in supply chain management has trained Tuomas to identify idle money in a value chain and how to make it work productively.

Please contact us, we are happy to help you!

Anu Hemmila Anu Hemmilä
Sales Executive
+358 50 501 5315

Anu Hemmila

Anu Hemmilä Sales Executive +358 50 501 5315