Achieving the correct level of working capital

 

Despite the fact that a high level of working capital is regularly maintained, it is important to accept the fact that a 'too high' level exists.

Having an exceptionally high degree on a continuous basis may show that more capital than is necessary is available inside companies – cash is not adequately spent or business growth is ignored for high liquidity.

The key is to keep positive working capital regularly, but not to get too big a level that leads to waste and inefficiency.

It's worth looking at the existing patterns in working capital in order to see where errors and gains are being made before you can make strategic adjustments to control your working capital effectiveness.

 

(Myllys, n.d.)