Enterprise working capital management. Enterprise working capital management system

Working capital (working capital) is a part of the enterprise’s capital invested in its current (current) assets, which are renewed with a certain regularity to ensure current activities and, at a minimum, turn over once during the year or one production cycle.

Current assets are divided, depending on the ability to more or less easily convert into money, into slowly marketable - inventories, quickly marketable - accounts receivable and the most liquid - short-term financial investments (easily marketable securities) and cash

The amount of each component of working capital depends on the performance of certain divisions of the enterprise. Production, sales, marketing, financial decisions, setting prices and wages - this is the shortest list of activities that affect not only the amount of working capital, but also the speed of converting individual assets into money. The volume and speed of changes in working capital are also influenced by the external environment of the enterprise (commodity markets, capital markets and financial institutions). A typical example is the large fluctuations in inventory levels in seasonal industries. When demand for the products of such industries begins to increase, inventories of finished goods decrease and accounts receivable increase. The cycle can be considered complete when accounts receivable (unpaid invoices for goods delivered) turn into money.

Working capital is important primarily from the standpoint of ensuring the continuity and efficiency of the current activities of the enterprise. Since in many cases a change in the value of current (current) assets is accompanied by a change in short-term (current) liabilities, both of these accounting objects are considered, as a rule, together within the framework of the net working capital management policy, the value of which is calculated as the difference between working capital and short-term liabilities.

Production activity is accompanied by the continuous movement of funds from one form of assets to another. Funds are a financial term that refers to resources invested in the assets of a business in the form of cash, accounts receivable, inventory, and equipment, or received by the business in the form of bank loans and credit, bonds, and equity capital. All management decisions cause changes in the size and pattern of stock flows. This applies to both funds expended (investments) and funds received (sources). As a result of correct management decisions, the cumulative effect of these movements leads to an increase in the market value of the enterprise. Under certain circumstances, the movement of funds causes a change in cash flows, which, under the influence of all decisions, determine the financial viability of the enterprise in the long term.

The movement of funds is shown in Fig. 3.1. Their full turnover time reflects the average time of investment in inventories and receivables. It is in the interests of the enterprise to reduce the duration of this turnover as much as possible.

In modern conditions, one of the most important areas of financial management is ensuring liquidity, i.e. maintaining the ability of an enterprise to pay expenses and debt obligations on a timely basis. If, in conditions of economic stability, the emphasis is on the growth of the enterprise and its profitability, then in conditions of economic uncertainty, inflation, and high interest rates, the financial manager must constantly worry about survival and maintaining liquidity.

Liquidity and cash flow are closely related. But the concepts of cash flow and fund flow have different origins and applications in finance and accounting. The concepts of profitability, net working capital, net income and fund flow that accountants deal with are not based on the concept of cash flow. The focus of these concepts is on income and expenses recorded by accounting, the purpose of which is to record expenses and income for certain periods. Financial managers, bankers, lenders and investors are more interested in current and future cash flows because they need to know what they have (will be able to have) to reinvest, pay dividends, interest and principal on loans.

Profit measures the relationship between income and expenses over a given period and therefore appears to be related to the concept of cash flow. But since revenues include credit sales and deferred receipts, and costs include accounts payable and debt, the concept of profit is related to the concept of flow of funds.

Net working capital is also related to the concept of fund flow. This value is the difference between current assets and current liabilities at a certain point in time. Net working capital is a purely quantitative concept that does not contain information about the quality of current assets or liabilities. Since the concept of net working capital refers to the current assets that will eventually be converted into cash, there is a relationship between the net working capital of a business and its cash. However, this relationship is not rigid and is a function of the time of sale of assets and receipt of money (therefore we talk about the movement, or flow, of funds). Only when we begin to take into account the time of turning assets into money or the time of payments for current liabilities can we talk about cash flow planning, since this concept is dynamic.

A financial manager must understand the difference between cash flow (financial concept) and flow of funds (accounting concept).

The main objectives of cash flow planning are:

1. foreseeing the enterprise's future demand for funds;
2. assessing the financial implications of this demand;
3. identifying possible courses of action and choosing the best one to satisfy demand.

Planning can begin after completing the analysis of various scenarios and estimating cash flows. The result of cash flow planning is, on the one hand, the investment of free (excess) cash, and on the other hand, the receipt of short-term loans to cover the deficit of free cash. Given the variety of money market instruments in which excess funds can be invested, and the many sources of short-term loans, the manager must solve the problem of selecting instruments that provide the greatest return with minimal risk (for investing) and the lowest interest rate (for borrowing).

The time it takes for money to pass through the working capital accounts and become money again can be measured and is called the cash flow cycle. At the beginning of the cycle, the company invests money in current assets, and the cycle ends when the money is returned as payment for the goods and services supplied. The duration of the cash flow cycle is equal to the average duration of inventory turnover plus the average delay in payments for goods and services supplied (accounts receivable) minus the average delay in payment of accounts payable. Calculating the duration of the cash flow cycle and finding ways to speed up the inflow of funds and slow down their outflow is the most important task for a working capital manager.

The cash flow cycle is defined as follows:

Cash flow cycle = Average inventory turnover time + Average accounts receivable payment period - Average accounts payable payment period = Number of days in the planning period x [Average inventory: Cost of goods sold + Average accounts receivable: Sales volume - Average accounts payable debt: Cost of goods sold].

In this case, the average volume of inventories, receivables and payables is equal to the arithmetic average of indicators at the beginning and end of the planning period.

For example, the average volume of inventories, receivables and payables are CU 1,500, 2,000 and 833 thousand, respectively. Sales revenue is CU 15,000 thousand, cost of goods sold is CU 10,000 thousand. Then the cycle cash flow movement is equal to:

Thus, the time required to convert inventory into finished goods is 54 days, it takes another 48 days to collect receivables, but the cash requirement or cash circulation period is not 102 days, but 30 days less due to deferment period for payments on accounts payable. Within 72 days, the company will have to finance production. These funds must be found. To estimate the financing costs of this cash flow cycle, the short-term financing rate is used, assuming that all financing is through debt (eg, 20% per annum). Then:

Financing costs = Average investment x Duration of investment x (Percentage: 360).

The manager's goal is to maintain a minimum level of these costs (see Table 3.1).

Table 3.1. Costs of financing the cash flow cycle

Components of net working capital	Average investment volume (thousand units)	Average investment duration (days)	Financing costs (thousand units)
Reserves	1500	54	45
Accounts receivable	2000	48	53
Accounts payable	833	30	14

Hence the total costs of financing the cycle:

45 + 53 - 14 = 84 thousand.

This calculation of the costs of financing the organization of cash flows is useful in that it allows the manager to assess how effectively the enterprise's funds are used. This assessment, in turn, serves as a starting point for assessing the relationship between the costs of maintaining a given cash flow cycle and the profit generated. If, for example, management considers the costs of accounts receivable to be excessive, it may change the terms of its credit policy to reduce the amount of cash expected to be received.

Each enterprise strives to shorten the cash flow cycle as much as possible, but without harm to production. This leads to an increase in profits, including because a reduction in the period of circulation of funds reduces the need for external sources of financing, and therefore financial costs, thereby reducing the cost of products sold.

The cash flow cycle, or cash circulation period, can be reduced by:

1. reducing the inventory circulation period due to faster production and sale of goods;
2. reducing the receivables circulation period by accelerating settlements;
3. lengthening the period of circulation of accounts payable by slowing down payments for purchased resources. These actions should be carried out until they lead to an increase in product costs or a decrease in sales revenue.

Thus, decisions in the field of inventory management, receivables and payables affect both the length of the cash circulation period and the policy regarding external sources of financing.

Inventories include raw materials, work in progress, and finished goods. Investments in inventories imply not only their cost characteristics, but also storage costs, costs due to moral and physical wear and tear, the implied cost of capital, i.e., the rate of profit that could have been received by otherwise investing funds invested in inventories with an equivalent degree of risk. A sufficient supply of raw materials and supplies saves the enterprise in the event of an unexpected shortage of appropriate supplies from stopping the production process or purchasing more expensive substitute materials. An order for a large batch of material resources, although it leads to the formation of large inventories, but provides the benefit of a discount on the purchase price. A large stock of finished products eliminates the possibility of product shortages in case of unexpectedly high demand. In addition, an enterprise, having a sufficient supply of finished products, can provide a discount to customers, stimulating the sale of its products. The financial manager's job is to identify and compare the costs and benefits associated with holding inventory.

Accounts receivable are unpaid invoices for delivered products (accounts receivable), as well as bills receivable. The objectives of accounts receivable management are to determine the degree of risk of customer insolvency, calculate the forecast value of the reserve for doubtful debts, develop and timely revise the terms of the credit policy, and increase the efficiency of the debt collection procedure (collection policy).

Cash and cash equivalents are the most liquid part of working capital. Cash includes money on hand, in current and deposit accounts. Cash equivalents are liquid short-term financial investments: securities of other enterprises, government treasury notes, government bonds and securities issued by local governments. In choosing between cash and marketable securities, the financial manager is solving a problem similar to that of inventory management. There are benefits associated with building a large cash reserve: reducing the risk of running out of cash and paying debts on time. On the other hand, the costs of storing temporarily free cash are higher than the costs associated with short-term investment of money in securities (they can be conditionally taken in the amount of lost profit in case of possible short-term financing). Thus, the financial manager needs to decide on the optimal cash holding.

Short-term liabilities are the enterprise's obligations to suppliers, employees, banks, the state and others, and the main share of them falls on bank loans and unpaid bills of supplier enterprises. In a market economy, the main source of loans are commercial banks. Therefore, it becomes common for the bank to require that loans be secured with inventory items. An alternative option for obtaining cash is for the business to sell part of its receivables to a financial institution and allow it to collect money on the debt obligation. Consequently, some enterprises can solve their short-term financing problems by pledging their existing assets, others - by partially selling them.

Net working capital can be presented as part of permanent (equity and long-term debt) capital aimed at financing working capital. It can be calculated as follows:

Net working capital = (Equity + Long-term liabilities) - Non-current assets.

On the other hand, net working capital can be considered as the part of working capital not covered by short-term accounts payable, hence its calculation:

Net working capital = Current assets - Short-term liabilities.

The goal of the net working capital management policy is to determine the volume and structure of current assets, the sources of their coverage and the ratio between them sufficient to ensure long-term production and efficient financial activity of the enterprise. To achieve this goal, the following tasks must be solved:

The inconsistency of the first and second tasks is visible: the greater the net working capital, the greater the liquidity, but the lower the profitability of assets. And vice versa. Thus, working capital management policies must provide a compromise between the risks of loss of liquidity and loss of profitability.

Based on the source of their occurrence, risks are conventionally divided into left-sided, caused by changes in current assets located on the left side of the analytical form of the balance sheet, and right-sided, caused by changes in liabilities (right side of the balance sheet).

Let's consider the state of assets that carry left-sided risks.

1. Insufficient volume of current assets:

1. cash - associated with the risk of interruption of the production process, possible failure to fulfill obligations or loss of possible additional profit;
2. own credit capabilities - leads to too strict and uncompetitive credit policy, fraught with the loss of customers and the income they bring;
3. inventory - is associated with the risk of additional costs or production interruption.

1. Excess current assets:

1. excess free cash leads to a lack of profit from investments in the short-term capital market;
2. “inflated” accounts receivable is accompanied by an increase in losses on bad debts;
3. Excessive inventory increases storage costs and the risk of obsolescence; maintaining excess assets requires unnecessary financing costs, which also reduces income.

The described options for the state of current assets correspond to two types of policies for managing current assets: restrictive and cautious (see Table 3.2).

Table 3.2. Signs and results of restrictive and cautious current asset management policies

Indicators	Restrictive policy	Cautious policy
Sales volume, thousand units	1000	1000
Profit before interest and taxes, thousand units	200	200
Current assets, thousand units	400	600
Non-current assets, thousand units	500	500
Total assets, thousand units	900	1100
Share of current assets in total assets, %	44,4	54,5
Asset turnover (sales / total assets)	1,11	0,91
Return on assets, %	22,2	18,2

In conditions of certainty, when sales volume, costs, order lead time, payment terms, etc. are precisely known, any enterprise would prefer to maintain only the minimum required level of working capital. Exceeding this minimum leads to an increase in the need for external sources of financing of working capital without an adequate increase in profits. Unjustified reductions in working capital lead to slower employee benefits, lower sales volumes, and production inefficiencies due to inventory shortages resulting from overly restrictive policies.

The situation changes with the advent of uncertainty. In this case, the company will need the minimum required amount of cash and inventories, plus an additional amount - safety stock in case of unforeseen deviations from expected values. Similarly, the level of receivables depends on the terms of the loan provided, and the most stringent terms for a given sales volume give the lowest level of receivables. If an enterprise adheres to a restrictive working capital policy, it will maintain a minimum level of safety stocks of cash and inventory and pursue a tight credit policy, despite the fact that this may lead to a decrease in sales volumes.

A restrictive policy in relation to working capital involves obtaining benefits from a relatively smaller volume of financial resources deadened in working capital, but at the same time it also entails the greatest risk. The converse is true for a cautious strategy. When choosing the relationship between the expected level of risk and return, moderate policy adheres to a “centrist position.”

From the point of view of its impact on the cash circulation period, a restrictive policy leads to an acceleration of the turnover of inventories and receivables, therefore, it results in a relatively short cash circulation period. The opposite trend is the cautious policy, which allows for higher levels of inventories and receivables and, therefore, a longer period of circulation of funds. As a result of a moderate policy, the duration of the circulation period of funds is at an intermediate level between the two described above.

Right-sided risks arise under the following circumstances.

High level of accounts payable. When a business purchases inventory on a deferred payment basis, it creates accounts payable with specific maturities. It is possible that a business has purchased more inventory than it needs in the near future, and therefore, with a significant amount of borrowing and with excess inventory sitting idle, the business will not generate sufficient cash to pay bills, leading to default.

Suboptimal combination between short-term and long-term sources of borrowed funds. Although long-term sources tend to be more expensive, in some cases they can provide lower liquidity risk and greater overall efficiency.

High share of long-term debt capital. In a stable economy, this source of funds is relatively expensive. Its relatively high share in the total amount of sources of funds also requires high costs for its maintenance, that is, it leads to a decrease in profits. If excessive short-term accounts payable increases the risk of loss of liquidity, then an excessive share of long-term sources increases the risk of decreased profitability.

The search for ways to achieve a compromise between the risks of loss of liquidity, profitability and the state of working capital and sources of covering them leads, on the one hand, to an increase in working capital and the share of permanent capital in their financing (the risk of illiquidity decreases, but the risk of a drop in return on assets increases), and on the other hand, on the other hand, to a decrease in working capital as less profitable assets and an increase in the share of cheaper short-term sources of financing (the risk of loss of profit decreases, but the risk of illiquidity and, as a consequence, insolvency of the enterprise increases). In each specific situation, the best in the given financial conditions, a reasonable combination of these types of risk, is determined.

The very concept of “working capital management” is defined as a change in the amount and structure of working capital in accordance with certain goals. At the same time, it is obvious that any impact on the amount of the company’s working capital can be carried out in three ways - through current assets, through short-term liabilities, through both of these levers simultaneously. Thus, the company manages its working capital by establishing a certain volume and structure of investments in current assets and choosing sources of their financing.

The main goal of the company is to increase value for owners in the long term. From the point of view of financial management, this goal essentially boils down to increasing the fundamental value of the company's equity capital. It is in this formulation that this goal is used in work as the goal of the first level of management of the company’s working capital.

The relationship between the fundamental value of a company's equity capital and the results of working capital management is shown in Figure (6).

Figure 6. Relationship between the results of a company’s working capital management and the fundamental value of equity capital

The above diagram can be commented as follows.

Under the residual operating income model, the fundamental value of equity is determined by its book value at the time of valuation, as well as the present value of the residual operating income stream. The amount of residual operating profit is determined, in particular, by the company's return on assets.

Return on assets, in turn, is a measure of a company's operating efficiency. Thus, increasing return on assets can be considered the goal of the second level of working capital management. The limitation on increasing the return on assets is the need to ensure an acceptable level of liquidity for the company.

The goal of the third level is the planned value of a certain indicator of the results of working capital management, established in accordance with the goals of higher levels.

The working capital management system is a set of management actions aimed at increasing the efficiency of use of financial resources diverted into the working capital of the enterprise, increasing the profitability of its assets and liquidity while maintaining uninterrupted operating activities. These tasks boil down to reducing the duration of the operating and production cycles of the enterprise by eliminating all ineffective and unproductive stages and processes, which allows increasing the turnover of working capital and reducing its volume. The working capital management system consists of four interrelated stages, presented in the following figure (7):

Figure 7. Working capital management system

Rationing is the first and necessary stage in building an effective working capital management system. It is the process of determining the economically justified amount of funds immobilized at all stages of the operating cycle on average at each point in time of the planned period, based on the specified (established in the plan) volumes of production, sales, purchases, terms of settlements with suppliers and customers. The importance of standardization is due to the fact that at this stage the main relationships between the level of working capital and the conditions in which the enterprise operates are identified. Thus, a working capital model is built with certain specified parameters and factors. At the stages following normalization, these factors can be optimized, and with the help of the generated model, a new, more efficient level of working capital can be determined.

The standardization methodology assumes that the standard is calculated by multiplying the standard by the volume of the indicator in the planning period in relation to which the standard is calculated. In this case, the norm is an economically justified calculated value that reflects one of the following two phenomena: the duration of the period during which financial resources are immobilized at a certain stage of the operating cycle (in this case, expressed in days); the volume of resources immobilized at a certain stage of the operating cycle, per a certain unit of account (in this case, expressed in monetary or physical terms per unit of account).

For example, when rationing inventories using traditional methods, the rate in days for basic materials, components and purchased semi-finished products (which make up a large share of inventories at the enterprise) is determined by the frequency of deliveries and/or write-offs of materials (current stock); the duration of operations performed with materials for their acceptance, unloading (acceptance and unloading stock), technological preparation for production (technological stock); the duration of the period from the moment of transfer of ownership of goods and materials until the moment they arrive at the warehouse in case of a discrepancy (transport stock); the duration of the period provided with an additional supply of materials in case of failure to deliver on time by suppliers (safety stock). Norms for other types of inventory items can be determined based on an analysis of their balances in past periods and the value of the selected calculation base that has developed in past periods - the indicator against which the norm is calculated (expressed in rubles for the selected calculation base).

The standard for work in progress (WIP) for a product is determined as the product of the duration of the product production cycle and the cost increase factor. This coefficient is an assessment of the nature of the increase in costs during the production process or the degree of involvement of material and labor resources at different stages of the product production cycle.

The standard for finished products (GP) is based on the length of the period necessary to prepare products for shipment (packaging, labeling, selection and assembly of products, etc.) and direct shipment.

The standard for accounts receivable from buyers and customers (receivables from buyers) is based on the average duration of deferred payment provided to the buyer upon delivery of products; for advances issued to suppliers and contractors - on the average prepayment period for resources purchased on an advance payment basis.

The traditional methodology for rationing working capital is presented in Figure (8).

Figure 8. Traditional methodology for rationing working capital

The considered approach to standardization is universal for various machine-building enterprises. For enterprises with a long production cycle, this methodology can be changed and specified taking into account their specifics and the characteristics of their functioning in a market economy.

Working capital management of an enterprise as a fundamental function determines the organization of working capital, including:

• - determination of the composition and structure of working capital;
• - establishing the enterprise’s need for working capital;
• - determination of sources of working capital formation;

The goal of working capital management is to determine the volume and structure of working capital, the sources of their coverage and the relationship between them sufficient to ensure long-term production and efficient financial activity of the enterprise.

Sources for the formation of working capital can be either own funds (for example, working capital; profit, etc.) or borrowed funds (for example, borrowed funds (short-term bank loans); government loans, etc.).

In the theory of financial management, various criteria for the effective management of working capital and the sources of its formation have been developed. The main ones are the following:

• 1) minimizing current accounts payable. This approach reduces the possibility of liquidity loss. However, such a strategy requires the use of long-term sources and equity capital to finance the majority of the working capital;
• 2) minimizing total financing costs. In this case, the emphasis is on the primary use of short-term accounts payable as a source of covering assets. This source is the cheapest, however, it is characterized by a high level of risk of non-fulfillment of obligations, in contrast to the situation when financing of working capital is carried out mainly from long-term sources;
• 3) maximizing the total value of the company. This strategy integrates the working capital management process into the firm's overall financial strategy. Its essence is that any decisions in the field of working capital management that contribute to increasing the economic value of the enterprise should be considered appropriate.

Working capital financing models developed in the theory of financial management, on the one hand, proceed from the fact that the management policy should ensure a search for a compromise between the risk of loss of liquidity and operational efficiency, on the other hand, when selecting sources of financing, a decision is made that takes into account the period of their attraction and usage costs.

So the policy of Brigham U. is that there are three policy options for the formation of working capital of an enterprise:

• - “Calm”, in which there is a relatively high level of inventories, receivables and cash. It is associated with a minimal level of risk and profit;
• - “Containing”, in which the level of working capital is reduced to a minimum. It can bring the greatest profit, but is also the most risky;
• - “Moderate” is the average option.

The level of working capital when implementing these strategies is illustrated by the graph (the linear relationship between working capital and sales revenue is conditional) (Figure 9):

Figure 9. Yu. Brigham's model

Stoyanova E.S. in his works he considers the policy of integrated operational management of current assets (hereinafter TA) and current liabilities (hereinafter TP), which combines the TA management policy with the TP management policy. Its essence consists, on the one hand, in determining a sufficient level and rational structure of TA, on the other hand, in determining the size and structure of TA funding sources.

Depending on the size of the share of current assets in the composition of all assets, the following policy options for managing current assets are distinguished, essentially similar to those described above:

• - aggressive. The main features are maintaining a high proportion of current assets and, accordingly, their low turnover. It provides a sufficient level of liquidity, but a low return on assets.
• - conservative. Its main feature is growth inhibition and a low level of current assets, but it carries a high risk of loss of liquidity due to desynchronization of receipts and payments, so it is carried out either in conditions of sufficient predictability of receipts and payments, sales volumes and inventories, or with strict savings.
• - moderate - a compromise option. Its parameters are at an average level.

Each type of such policy must be matched by a funding policy. Depending on the size of the share of short-term liabilities, the following policy options for managing short-term liabilities are distinguished among all liabilities.

• - aggressive. Its main feature is the predominance of short-term liabilities.
• - conservative. The main feature is low specific gravity.
• - moderate - a compromise option. Average level of short-term credit.

The compatibility of various types of TA and TP management policies is illustrated by the policy selection matrix for integrated operational management of TA and TP (Table 1).

Table 1. Matrix of integrated operational management of current assets and liabilities (integrated management policy (hereinafter referred to as PKU))

TA management policy TP management policy	Aggressive	Moderate	Conservative
Aggressive	Aggressive	Moderate	Don't match
Moderate	Moderate	Moderate	Moderate
Conservative	Don't match	Moderate	Conservative

When analyzing the PKU matrix, it is clear that some types of current asset management policies are not combined with certain types of current liability management policies. This applies to an aggressive policy for managing current assets, which is not combined with a conservative policy for managing current liabilities, and vice versa. First of all, this is due to the fact that measures for managing current assets come into direct conflict with methods for managing current liabilities.

This matrix has practical meaning when making decisions on the policy of integrated management of current assets and current liabilities. A company can make the right choice in this fundamental issue, having all the information (necessarily reliable) about the internal environment of the enterprise and the main parameters of the external environment.

From the above, we can conclude that the sources of the formation of working capital can be both own and borrowed funds. Depending on the structure of working capital financing, various working capital management policies are distinguished.

The efficiency of using working capital is an integral part of the efficiency of all enterprise activities. Indicators such as material assets, fixed assets, labor resources, financial resources, etc. may depend on the level of efficiency in terms of working capital. for this reason, the enterprise must strive to improve the efficiency of the use of working capital, which is necessary in order to maximize the level of economic activity of the enterprise as a whole.

In practical activities, the rationing of working capital is preceded by an analysis of working capital and its main elements. To conduct an analysis in order to increase the liquidity of an enterprise, the author proposes criteria that allow identifying unclaimed inventories and overdue and doubtful accounts receivable. For example, to identify excess and illiquid materials, it is necessary to analyze the time period during which the materials are in the warehouse from the moment of their purchase to the moment at which the analysis is carried out, the relative speed of their consumption. For work in progress and finished products, the basis for recognizing inventories as unclaimed may be the absence (termination) of a contract with the customer and the absence of a new buyer, the absence of movement on this item within a certain period. To identify doubtful accounts receivable, it is necessary to analyze the age of the debt and compare it with the terms stipulated by the contracts. Organizing work to reduce the volume of unclaimed inventories (for example, sales) and to return overdue debts can help generate cash in the short term and, accordingly, increase the liquidity of the enterprise.

To standardize and increase the efficiency of using working capital in the medium term, the dynamics of the volume of working capital and its individual elements that have developed at the enterprise, as well as the dynamics of the parameters (or factors) used to calculate the standard are analyzed. For example, with regard to materials, it is necessary to analyze the planned periods of their use in production and for economic needs at the time of analysis, the frequency of purchases and write-offs for production. For work in progress, the duration of the production cycle of the product and the nature of the increase in costs during the production process are of interest. For finished products - the time spent in the warehouse of finished products from the end of their production until the moment of shipment. For accounts receivable, the main terms of settlements with buyers and customers are analyzed.

Working capital – This is another indicator of the organization's liquidity. It reflects the amount of capital that an organization has to carry out its daily operations and is represented by its net current assets (i.e. current assets minus current liabilities).

Working capital management – This is the process of planning and controlling the level and ratio of the company's current assets, as well as the sources of their financing. The task of working capital management is to decide what should be the maximum acceptable level of accounts receivable, the maximum possible level of short-term investments, the minimum required level of inventories, and the required level of cash at a certain point in time.

Effective management of working capital is a necessary factor for the successful development and long-term functioning of an organization. The importance of this factor can be considered both in relation to the liquidity of the organization and in relation to its profitability. Ineffective working capital management leads to the fact that cash is “frozen” in the useless and unused assets of the organization, which consequently leads to a decrease in its liquidity, as well as a decrease in its ability to invest in fixed assets and further development, and consequently to a decrease in its profitability.

One of the elements of capital management is formation of management balance. The real working balance should include the real value of assets and liabilities. Let us point out some typical differences between accounting and management balance sheets:

illiquid products in the warehouse of finished goods and raw materials can actually cost ten to twenty times less;

obsolete and unused equipment, buildings, structures that are not involved in the current activities of the enterprise have no real value, especially if they cannot be sold, leased, or used in any other way;

the amounts of penalties and fines for debts (to the budget, extra-budgetary funds, loans) are not included in full.

Thus, the real value of assets may be less than the accounting value, and the amount of debt may be greater.

The working capital management process is logically structured according to the following scheme

We analyze the current assets of the enterprise in the previous period and compare them with the results of the company’s activities

Choosing a policy for the formation of current assets today

We optimize the volume of current assets of the enterprise

We optimize the ratio of the constant and variable parts of the company’s working capital

We provide the required liquidity of current assets

We ensure the necessary profitability of current assets

We determine the sources of formation of current assets

43. Rating assessment of the organization’s activities

Financial condition is the most important characteristic of the economic activity of an enterprise. Let's consider the methodology for a comprehensive comparative rating assessment of the financial condition, profitability and business activity of an organization, based on the methodology of financial analysis in market conditions. The components of the methodology are:

Collection and analytical processing of initial information for the period;

Updating the system of indicators used for rating the financial condition, profitability and business activity of the organization and calculating the final rating indicator;

P=sum 1/number of indicators used for rating assessment *normative level for i-coefficient * i-coefficient. To determine the rating of an organization, it is proposed to use five indicators. 1. Provision of own funds (Ko), which characterizes the organization’s availability of its own working capital necessary for its sustainability. Regulatory requirement: Ko>=1. 2 Coverage ratio, which is characterized by the degree of total coverage of the amount of urgent liabilities by all current assets of the organization (balance sheet liquidity) Regulatory requirement: Kp >= 2. 3. Intensity of turnover of advanced capital, which characterizes the volume of sales of products per 1 ruble of funds invested in activities organizations, Regulatory requirement: Ki >=2.5.4. Management, which is characterized by the ratio of the amount of profit from the sale and the amount of proceeds from the sale. The regulatory requirement is determined by the level of the discount rate of the Central Bank of Russia. 5. Profitability (profitability) of the enterprise, which characterizes the volume of profit per 1 ruble. equity capital, Regulatory requirement: Kr >= 0.2. The expression for the rating number, determined on the basis of the listed five indicators, will look like this: P = 2Ko + 0.1 Kp + 0.08 Ki + 0.45 Km + Kr.

Working capital is capital that changes during the functioning of the organization. In essence, these are the assets and liabilities that ensure the current, short-term activities of the enterprise. This distinguishes it from non-current capital (means of production). Working capital management includes developing decisions on the use of current assets, as well as their financing.

Enterprises use various methods of working capital management: planning working capital and the flow of cash (payment) funds, forming the optimal volume of ordering resources, managing receivables and payables, and others. The order of use of certain methods is determined by the internal financial situation at the enterprise.

In the context of delayed payments, the first priority for practitioners is methods of managing and monitoring the current financial condition, and they are the focus of this chapter. A number of methods (in particular, the formation of an optimal order) are well described in the literature. The current practice of managing accounts receivable is quite simple: ensuring constant contact with customers for the fastest receipt of payment funds.

The practice of accounts payable management is to avoid paying creditors for as long as possible. Some aspects of choosing priorities for paying accounts payable are discussed in the section on liability management.

Tasks of working capital management.

Capital management is the most important task of an enterprise. However, according to experts, today it is supplied to no more than 10% of large Russian enterprises. In trade and private structures, much more attention is paid to capital management, since this determines the amount of capital of the owners.

Assigning the functions of capital management and accounting to existing specialists and departments (finance department, PEO) does not lead to success, since the main tasks performed by these departments (for PEO - income and expense planning, for the finance department - planning and management of financial flows) dominate over the task of capital management and displace it. To carry out the function of capital management, it is advisable to create independent divisions (departments, bureaus). At the initial stage, it is possible to identify individual specialists who deal only with this task.

Currently, in many enterprises, managers are also the largest shareholders. As market transformations deepen, owners will hire professional managers to increase company capital. In this regard, the tasks of increasing capitalization (the market value of equity capital) arise (and will significantly increase). That is why owners often prioritize the task of capital management. At large OJSCs with non-state ownership, this process is in full swing.

One of the elements of capital management is formation of management balance. The real working balance should include the real value of assets and liabilities. Let us point out some typical differences between accounting and management balance sheets:

1. illiquid products in the warehouse of finished goods and raw materials can actually cost ten to twenty times less;
2. obsolete and unused equipment, buildings, structures that are not involved in the current activities of the enterprise have no real value, especially if they cannot be sold, leased, or used in any other way;
3. the amounts of penalties and fines for debts (to the budget, extra-budgetary funds, loans) are not included in full.

Thus, the real value of assets may be less than the accounting value, and the amount of debt may be greater.

Example. At one of the instrument-making enterprises in Russia, according to the balance sheet, the amount of current assets was 130 million rubles, the amount of current liabilities was 180 million rubles. Own working capital (SOC) according to accounting is equal to -50 million rubles, current liquidity is 72%. The real assessment of current assets amounted to 50 million rubles, current liabilities - 230 million rubles, which gives an estimate of the COC in the amount of -180 million rubles. and differs markedly from accounting estimates. Current liquidity - 22%.

Working capital management Today, the enterprise is one of the main mechanisms for the smooth operation of the enterprise. Therefore, the main goal of this work is to analyze the operation of the main levers of working capital, as well as their detailed study.

Modern methods of working capital management imply a scheme that ensures planning of working capital for the purpose of their rational use. Therefore, optimization of working capital for modern economic conditions is a priority in the overall activities of the enterprise.

This will cover the following questions:

1. Working capital of the enterprise. General concepts
2. Composition and classification of working capital
3. The essence of working capital. Circulation of working capital
4. Rationing of working capital
5. Sources of working capital formation
6. Inventory management
7. Ways to accelerate the turnover of working capital

1. Working capital of the enterprise. General concepts

The activity of an enterprise in the production and sale of products requires the presence of not only fixed assets, but also working capital, which is a collection of funds located in inventories, production and circulation processes.

Working capital is an important part of the working capital of business entities and consists of two parts:

Working capital;
means of circulation.

The purpose of advancing funds Working capital is the financing of costs associated with the manufacture of finished products, performance of work or provision of services. As a result, working capital is reimbursed from sales proceeds and conditions are created for resuming the production process, thereby ensuring its continuity.

Consequently, the essence of working capital consists in their sequential transition from monetary form to material form, and then to commodity form. The turnover ends again in monetary form with a certain share of increment, indicating a positive result of the production and economic activities of the enterprise (sometimes vice versa). Thus, the working capital of the enterprise resides either as part of the working capital of production or as part of the means of circulation.

2. Composition and classification of working capital.

The composition of working capital is understood as the totality of elements that form working capital. In practice, working capital is divided into circulating production assets and circulation funds.

Working production assets are part of the production assets that are involved in production once in the form of objects of labor, are entirely consumed in each production cycle, undergo changes in their in-kind form, completely transfer their value to the finished product (cost of work, services), are reimbursed in kind and cost after each production cycle.

Working production assets include the following elements: industrial stocks in warehouses; work in progress and semi-finished products of own production and manufacture; Future expenses.

Productive reserves- objects of labor prepared for launch into the production process. Industrial inventories in warehouses - stocks of raw materials, supplies, purchased semi-finished products, fuel, containers, spare parts for the repair of machinery and equipment, inventory, fixtures and other similar values. The working capital assets include means of labor worth up to 20 thousand rubles. per unit and a service life of less than one year and (or) one operating cycle, as well as special equipment.

Work in progress and semi-finished products of own production- objects of labor located at different stages of the production, processing, assembly process (at workplaces, during inter-operational and inter-shop transportation, in workshop storerooms, technical control), i.e. products that have not been completed and are subject to further processing. Deferred expenses - production and other costs incurred during the reporting period, but subject to inclusion in the cost of finished products in the future. These are taxes paid in advance, rent, personnel training costs, costs for the design and development of technology for new types of products, and relocation of equipment.

Circulation funds are necessary so that an enterprise can sell its products, conduct settlements with customers, purchase raw materials and fuel with the money received, and pay wages.

The structure of working capital is understood as the quantitative relationships of individual elements in the total volume of working capital, expressed as a percentage of the total (inventory, work in progress, deferred expenses, finished products, shipped goods, accounts receivable, short-term financial investments, cash).

The classification of working capital involves their division according to economic content, sources of formation, degree of liquidity, management practice, accounting standards, material content.

According to economic content, funds invested in circulating production assets and circulation funds are distinguished.

According to sources of financing, working capital is divided into own (financed from equity capital) and borrowed funds.

3. The essence of working capital. Circulation of working capital

In the process of production and sales of products, enterprises have a need for funds for the acquisition of labor items (raw materials, supplies, fuel, energy resources) necessary for organizing production and acting as circulating production assets, as well as for funds for various payments and organization of circulation released products - circulation funds.

Working capital- this is part of the capital of an enterprise that finances circulating production assets and circulation funds.

This is the totality of funds advanced to create circulating production assets and circulation funds, ensuring a continuous circulation of funds.

The time during which working capital completes its circulation is called the period of turnover of working capital. The total duration of the circulation is the time (in calendar days, months) from the moment funds enter the circulation for production of products until the moment the funds are returned after the sale of finished products (works, services). The total time consists of the time spent by working capital in production (working time, breaks, time in inventory) and time in circulation (product sales time, settlement time, procurement).

4. Rationing of working capital

Rationing of working capital can be formulated as a scientifically based determination of the need for working capital of an enterprise in order to ensure rhythmic production and sales of products.

The importance of rationing in market conditions increases sharply, as it affects the solvency and financial condition of the enterprise.

The process of rationing working capital consists of the following four stages:

Preparatory - collection and analysis of initial data for standardization, analysis of reporting and planning data on the range of material assets used, current standards for material consumption and prices, study of relationships with suppliers of materials and consumers of products, etc.

Organizational - development of organizational, technical and economic measures to improve production, improve supply and sales conditions at the enterprise;

Calculation of norms and standards of working capital - determination of norms and standards for individual elements of working capital by divisions, workshops and the enterprise as a whole based on prepared data.

Final - approval of norms and standards of working capital and their distribution to the relevant workshops, divisions and departments of the enterprise.

Rationing of working capital is based on the following principles:

Ensuring uninterrupted production processes and sales of products, as well as timely payments to suppliers and consumers;

Taking into account the characteristics of the enterprise and the actual conditions of supply for production, sales and payments, linking them with the production program;

Ensuring the progressiveness of inventory standards through the introduction of advanced equipment and technology, automation and intensification of production, the use of more efficient and cheaper materials, improving the organization of labor and production;

Establishing the responsibility of technical and economic services, as well as each employee, for the education and use of individual components of working capital.

The calculation of the working capital standard can be performed using the direct counting method or the analytical method.

Determining the need for working capital using the direct counting method is carried out on the basis of indicators of the enterprise’s production program for the planned period: production volume and sales of the range of products, production cost estimates, conditions of logistics, supply frequency stipulated in contracts with suppliers and consumers, plan organizational and technical measures, etc. The advantage of this method is that the standard is determined on the basis of an accurate calculation that ensures the efficiency of education and use of certain types of resources.

The analytical method of calculation is characterized by relative simplicity, i.e. the possibility of its use in cases where the use of direct counting is difficult.

The main disadvantage of the analytical method for calculating the working capital standard is that it does not identify production shortcomings that occurred in the past period. When rationing by this method, the decisive factors of production are not taken into account, since it is based on average figures and fixes the level achieved in the past.

5. Sources of working capital formation

According to the sources of formation, working capital is divided into own and borrowed. Efficient operation of the enterprise- is achieving maximum results at minimum costs. Minimizing costs is, first of all, optimizing the structure of sources for the formation of working capital of an enterprise, i.e., a reasonable combination of own and credit resources. A certain criterion here is the standard of own working capital, which serves as a kind of dividing line between own and borrowed funds.

Sources of covering the lack of working capital can be profit, loans (bank and commercial, i.e. deferred payment), share capital (authorized) capital, redistributed resources, accounts payable, etc.

Accounts payable means the use of funds that do not belong to the enterprise, for example, debt on unpaid bills on time, debt on payments to the budget; for commercial loans; on salary and accrual for it. Accounts payable, which are constantly at the disposal of the enterprise, participate in the turnover along with its own funds. In the process of formation and expenditure of this accounts payable, its amount changes: in some periods it decreases, in others it increases. However, there is always a certain balance, which allows this debt to be equated to the enterprise’s own funds and called stable liabilities.

Stable liabilities include carry-over wages, payroll accruals, reserves for future payments and expenses, etc.

In conditions of inflation, it is preferable to replenish working capital through borrowed funds.

Increasing borrowed funds is possible in two ways:

By attracting a loan (for the sake of replenishing working capital, naturally, short-term);
covering accounts receivable with accounts payable.

A loan is beneficial to an enterprise when the rate of profit from the operation or project for which the loan is taken is greater than the interest rate on the loan. If this condition is met, the company has a chance to increase its cash flows, increase its net return on equity and dividend opportunities.

6. Inventory management

At the enterprise level, inventories are among the objects that require large capital investments, and therefore represent one of the factors determining the policy of the enterprise. For most industrial enterprises, inventories represent critical assets. Stocks include:

Inventories (raw materials and supplies);
unfinished production;
finished products in warehouse.

Purpose of an inventory management system- ensuring uninterrupted production of products in the required quantity and on time and, on this basis, achieving full implementation of output with minimal costs for maintaining inventories. Effective inventory management allows you to:

Reduce production losses due to material shortages;
accelerate the turnover of this category of working capital;
minimize excess inventory, which increases the cost of operations and freezes scarce funds;
reduce the risk of aging and damage to goods;
reduce inventory storage costs.

To determine the optimal amount of inventory, it is necessary to analyze the costs associated with maintaining inventory, in two directions:

Cost of order fulfillment (salaries of supply department employees, investment in equipment and overhead costs, cost of sending documents, travel expenses, costs of receiving and checking goods);

Inventory storage costs (maintenance of warehouse premises, insurance costs, damage to goods, theft, etc.)

7. Ways to accelerate the turnover of working capital

Accelerating the turnover of working capital is the primary task of enterprises in modern conditions and is achieved in the following ways.

At the stage of creating inventories:

Introduction of economically feasible stock standards;
bringing suppliers of raw materials, semi-finished products, components, etc. closer to consumers;
widespread use of direct long-term connections;
expansion of the warehouse system of logistics, as well as wholesale trade in materials and equipment;
comprehensive mechanization and automation of loading and unloading operations in warehouses.

At the work in progress stage:

Acceleration of scientific and technological progress (introduction of advanced equipment and technology, especially waste-free and low-waste, robotic complexes, rotary lines, chemicalization of production);
development of standardization, unification, typification;
improvement of forms of organization of industrial production, use of cheaper construction materials;
improving the system of economic incentives for the economical use of raw materials and fuel and energy resources;
implementation of a just-in-time system;
increasing the share of products in high demand.

At the application stage:

Bringing consumers of products closer to their manufacturers;
improvement of the payment system;
an increase in the volume of products sold due to the fulfillment of orders through direct connections, early release of products, production of products from saved materials;

Careful and timely selection of shipped products by batch, assortment, transit norm, shipment in strict accordance with concluded contracts.

Other factors also influence the structure of working capital. It should be taken into account that some factors may be long-term in nature, while others may be short-term.

Conclusion

Working capital, along with fixed assets, creates the material and technical base of the enterprise, ensuring the achievement of production and economic goals.

Working capital of an enterprise is a combination of circulating assets of production and means of circulation.

The material content of working capital is raw materials, materials, fuel, semi-finished products, tools, household equipment and equipment. Working capital consists of means of production located in production inventories and in the production process.

Funds of circulation include finished products, goods shipped, cash in settlements, accounts receivable and funds in current accounts.

Working capital is entirely consumed in the production process, gradually changing its natural form and completely transferring its value to the cost of the finished product.

The circulation of working capital involves their sequential presence in the form of cash, inventories and, ultimately, finished products. From its sale, the enterprise again receives the funds necessary to resume the production process.

Every organization should strive to accelerate the turnover of working capital.

Working capital of an enterprise is divided into standardized and non-standardized.

All elements of working capital, located both in production inventories and directly in the production process, as well as finished products, are subject to standardization. Non-standardized working capital includes goods shipped, cash in settlements and in current accounts, and accounts receivable.

Enterprise working capital management- a difficult task that every enterprise faces and which must be solved even before the opening of the company.