A comprehensive primer for executives and managers on working capital management With limited access to credit and short term funding, it is increasingly important that companies focus on working capital management to free up funds and optimize liqidity. Written in the easy-to-follow Essentials Series style, Essentials of Working Capital Management covers the main components of working capital. Covers the latest trends around working capital Discusses a range of working capital topics, including cash management, banking relations, accounts receivable, inventory, accounts payable, and foreign exchange Analyzes the efficient utilization of current assets and liabilities of a business through each phase of the operating cycle Examines the planning, monitoring, and management of the company's collections, disbursements and concentration banking Explores the gathering and management of information and forecast data to effectively use funds and identify risk Focused on how businesses can continue to be successful in these difficult times, specifically in relation to the limited credit available to businesses, this book puts practical guidance at your fingertips so you can put them to work right away. A comprehensive case introduces each major section of the book, and suggested solutions are included in a book appendix.

Table of Contents:
Preface xi Acknowledgments xv Chapter 1 Concepts in Working Capital Management 1 Working Capital Concepts 1 Ratio Analysis 7 Working Capital Ratios 7 Significance of Working Capital 12 Applying These Ideas to a Real Business 15 Summary 18 Part I Cash—Transactions, Banking and Credit, and Financial Instruments 19 Comprehensive Case: Widget Manufacturing Case I 19 Chapter 2 Cash: Management and Fraud Prevention 25 Forms of Cash 26 Lockboxing 30 Controlled Disbursement 34 Bank Products Used for Electronic Transactions 37 Summary Chapter 3 Cash, Credit, and Short-Term Financial Instruments 43 Developing a Short-Term Forecast 44 Preparing a Cash Budget 45 Credit Financing 48 Short-Term Investments 54 Summary 59 Chapter 4 Concentration Banking and Financial Institution Relationships 61 Changing Financial Landscape 62 Bank Relationship Management 63 Concentration Banking 64 Request-for-Proposals 69 RFP Evaluation 75 Bank Relationship Reviews 78 Summary 80 Part II Other Working Capital Accounts— Receivables, Inventory, and Payables 81 Comprehensive Case: Widget Manufacturing Case II 81 Chapter 5 Accounts Receivable and Working Capital Issues 89 Elements of Receivables Management 90 Receivables Cycle Monitoring: Ratios 94 Receivables Cycle Monitoring: The Aging Schedule 96 Sales Financing 98 Credit Reporting 99 Terms of Sale 103 Invoice Generation 104 Asset-Based Financing: Receivables 107 Debt Collection Agencies 109 Summary 109 Chapter 6 Inventory and Working Capital Issues 111 Elements of Inventory Management 112 Inventory Cycle Monitoring: Ratios 113 Inventory Cycle Monitoring: Metrics 115 Purchasing 117 EOQ and JIT 122 Work-in-Process 124 Asset-Based Financing: Inventory 129 Summary 131 Chapter 7 Payables and Working Capital Issues 132 Elements of Payables Management 133 Payables Cycle Monitoring: Ratios 134 Accounts Payable Function 136 Payables Using Internal Processes 139 Payables Outsourcing 140 Payroll Alternatives 145 Summary 149 Part III Issues in Working Capital Management 151 Comprehensive Case: Widget Manufacturing Case III 151 Chapter 8 International Working Capital 155 Capitalism Goes Global 156 Elements of International Working Capital 157 Financing of International Transactions 158 Foreign Exchange Markets 160 Analysis of Country Risk 167 Other Significant Issues in International Working Capital 169 Cultural and Corporate Practices Affecting Working Capital 171 Summary 174 Chapter 9 Information and Working Capital 175 Information Technology 176 Bank Information Technology 178 Internet Bank Technology 182 Enterprise Resource Planning: An Alternative Approach 188 Choosing Working Capital Information Systems 191 Summary 197 Chapter 10 Managing the Working Capital Cycle 199 Risk and Working Capital 200 Enterprise Risk Management 202 Efficiency and Working Capital 204 Liquidity and Working Capital 207 Suggested Actions 210 Developments in Working Capital Management 215 The Cost of a Transaction 217 Summary 221 Appendix A: Suggested Solutions to Widget Manufacturing Company Case—Parts I, II, and III 223 Appendix B: Basic Financial Concepts 233 Appendix C: Web Sites of Working Capital Market Participants 238 Appendix D: Glossary 241 About the Author 262 Index 263