Working Capital Management - Best Practices Adopted across Multiple Industries

Working capital management is one of the most important factors impacting the performance of the firm. Efficient management of working capital is crucial of sustaining the business in the long run. Working capital best captured through Cash Conversion Cycle (CCC) or Cash Conversion Efficiency (CCE) reveals how good the company is at managing its working capital. Analysis of working capital management over the past few years has revealed that while many companies have enjoyed double-digit sales growth, but their CCE, which is the ratio of operating cash flow as a percentage of sales, has been decreasing year-on-year. This means that organizations are converting sales to cash at a lower rate and not taking advantage of the scale in good times. Improving the CCE will become all the more imperative in the face of slowdown due to economic downturn and with growing competition. This means companies would need to resort to both cost minimization and adopt the best practices in working capital management to improvise cash flows.

This paper focuses on the understanding and analysing the best practices adopted the by companies across several industries like automobile, steel, cement etc. to improve their working capital management and cash management capabilities to better survive and thrive in the competitive economic environment. The paper attempts to enlist best practices which can be adopted by companies to perform their operations efficiently and to improve their financial performance.