Question

Discuss the importance of working capital and revenue cycle management to the financial viability of an organization. As you consider the materials presented this week, where do you perceive there to be the highest frequency of problems? What are the solutions to overcoming the issue(s) you have highlighted?

Answer 1

Both Working capital and revenue cycle management are the utmost critical things for any organization's financial existance. The working capital is something which is required to run day to day operations of the company. If any organization falls short of cash to run the business then it forces them to raise additional short term debt to run the business. So this adds to the Short Term loan of the organization.

It is very important to manage the revenue cycle to evenly spread the revenue to be received so that working capital of the company can be financed. This is the one where most of the problems are going to be. Few of the measures which we can use to overcome these issues are: by renegotiating the terms with creditors/debtors, by converting the credit sales into cash, by removing the bottlenecks and by improving the efficiency.