work capital Management The administration of working capital is responsible for directing and directing the concepts and circulating facts of the company, such as accounts receivable, and even inventories. Working capital is defined as the money or current or current assets that a company owns. to be able to exercise its commercial, industrial or services activity. The administration of working capital is the intrinsic search to optimize and efficiently use these resources that are essential for the entity, which is basically achieved with short-term financial policies and analysis, which minimizes the risks of illiquidity and, also, increases the solvency. The administration of working capital in a company makes it possible for the entity to pay its obligations on time, avoiding costs or negative reports to suppliers; provides the solvency necessary for the operation of the company (raw material, labor, etc.), avoids the delay in production activities that is accompanied by other costs, prepares the entity for possible shortages, among other factors. In conclusion; The administration of working capital involves balancing what you have, with respect to what is owed and also helps in long-term business development. Note: The more current assets an entity owns, the lower the likelihood of illiquidity risks. In relation to the above, account must be taken of how working capital is maintained in a positive way or what sources are used to obtain it. First, the best way to obtain solvency is to increase commercial productivity; In other words, more colloquial is the increase in sales, since it provides all kinds of benefits for the company. Second, it is the capitalization that occurs through the issuance of shares and the capitalization of profits for the benefit of the entity; It could also make use of financing with banks or suppliers to obtain resources for the operation of the entity; and finally, the combination of the three previous points can be considered. Now, in the subject that is being exposed there are several sub-themes that require attention. 1. Cash administration. 2. Administration of accounts receivable. 3. Inventory management. The administration of cash is one of the most important tasks of the administration of working capital. and basically it's made up of a company's available, and what is sought is the proper use of it, optimizing it to obtain essential resources to carry out commercial or industrial activity. Now, how is cash management controlled? In the first instance with the internal audit, which will be responsible for taking samples to rate the procedures and policies of the company, and accordingly, the auditor will evaluate, rate and, if necessary, make recommendations to the entity. 2. Accounts receivable management is the management of credit sales, whether of products or services, maximizing the return on investment or obtaining a satisfactory return that adds profitability to the entity. Reference is made to the increase in profitability of accounts receivable, through accelerated portfolio turnover, reducing credits and reducing operating expenses of this department. The accounts receivable administration must implement a credit procedure or policy, which regulates such credit sales; This seeks to measure the financial and commercial strength of a potential debtor, thus allowing these policies to make better decisions when approving a loan. Now, how are accounts receivable controlled? As with cash management, internal auditing could be the best option, since the auditor, through inspection and surveillance procedures and based on policies, could qualify such control or area. 3. The inventory management seeks financially to control, monitor and optimize investments in this department, trying to reduce costs and reduce risks of fraud or error, and in turn reducing the time between entering and leaving said investments. It is necessary to say that this task does not only depend on the finance department; It is a work in conjunction with the area of production and marketing, which makes the task of controlling this process more complex, but with policies and process manuals it could be handled efficiently. How is inventory management controlled? It is necessary to emphasize that in these cases internal audit is the best option; The auditor, knowing the activities and policies, can easily identify the risks and recommend improvements to the process or contingency plans against the possibility of a negative event. Teacher: Robinson Carreño V.
