What is Working Capital Management?
Working Capital Management is the process of managing a company’s short-term assets and liabilities to ensure it has enough cash to meet its day-to-day operational expenses while using its resources efficiently.
It focuses on maintaining the right balance between cash, inventory, accounts receivable, and accounts payable. Effective working capital management helps businesses pay suppliers on time, collect customer payments faster, avoid unnecessary borrowing, and maintain healthy cash flow.
For example, a food manufacturer may generate strong sales but still face cash shortages if customers take 90 days to pay while suppliers expect payment within 30 days. Managing this gap is a key objective of working capital management.