Working Capital Strategies

Working Capital Strategies

Many companies have learned the advantages of benchmarking.   Benchmarking allows companies that may be facing issues in a certain area to look at other companies who may have had similar issues and mirror what they have done.   A company will look for best practices of other companies without having to reinvent the wheel.   There are many different types of benchmarking strategies companies utilize including competitive benchmarking, generic benchmarking, and internal benchmarking. Benchmarking allows opportunities to improve areas of the business and search for best practices.   Lawrence Sports can take an advantage of other company’s best practices in regards to cash budgeting, working capital strategies, and long-term opportunities.
What is the purpose of cash budgeting?
Cash budgeting is a budget for cash planning and control that presents expected cash inflow and outflow for a designated time period. The cash budget helps management keep cash balances in reasonable relationship to its needs. It aids in avoiding idle cash and possible cash shortages, (Blondin, 2008).   A cash budget is extremely important, especially for small businesses because it allows a company to determine how much credit can be extended to customers before they begin to have liquidity problems.   Cash flow budgets are essential in establishing credit and purchasing policies, as well as in planning credit line usage and short-term investments in commercial paper and other securities, (Blondin, 2008).
Cash budgeting consists of six sections.   The first is the beginning cash balance.   This includes cash collections from customers, and other receipts it contains the last period’s closing cash balance.   Cash disbursement is another section of cash budgeting.   Disbursements are comprised of all cash payments made by purpose.   It lists all planned cash outflows for the period excluding interest payments on short-term loans.   Cash excess or deficit section is very important in cash...