Working Capital Procedure | TM1000

Working Capital Procedure

The Working Capital Procedure describes methods to properly manage the working capital invested to operate the business in areas such as Accounts Receivable, Accounts Payable, and Inventory.

The working capital procedure minimizes working capital while meeting all operational needs. It applies to Finance, Accounting, Sales, and Operations departments. (8 pages, 1278 words)

Working Capital Responsibilities:

The CFO (Chief Financial Officer) is responsible for overseeing working capital and for completing the TM1000-1 WORKING CAPITAL PLAN.

Top Management is responsible of approving the TM1000-1 WORKING CAPITAL PLAN.

Working Capital Definitions:

Total Working Capital – The total amount of capital needed to operate the business.

Accounts Receivable – Money owed to the company (credits) for goods and services delivered, and it frequently refers to the department and/or processes in place to collect these payments including invoicing, processing payments, and collections and deposits.

Days Sales Outstanding (DSO) – The average number of days it takes to collect payment after the sale is made.

Accounts Payable – Payments owed (liabilities) by the company to suppliers, service providers, and other creditors for goods and services provided, and it frequently refers to the department and/or processes in place to make such payments.

Days Payable Outstanding (DPO) – The average number of days it takes the company to pay invoices and other payables.

Working Capital Procedure Activities

• Working Capital Plan
• Working Capital Performance
• Reviewing the Working Capital Plan
• Improving the Working Capital Plan

Working Capital Procedure Forms

• Working Capital Plan Form