1.

Temporary WC

Permanent WC Short-term
Financing

Long-term
` Financing
2. Temporary WC

Permanent WC Short-term
Financing

Long-term
Financing

`
3. Temporary WC

Permanent WC Short-term
Financing

Long-term
Financing
`
4. – 6 Fill the WCFP matrix below with the appropriate
Working Capital. Use the following words given below.

WCFP Short-term Long-term

Financing Financing
4) Maturity Matching
5) Conservative
6) Aggressive

Temporary WC Some Temporary WC

Permanent WC Some Permanent WC
1. Temporary WC

Permanent WC Short-term
Financing

Long-term
` Financing
2. Temporary WC

Permanent WC Short-term
Financing

Long-term
Financing

`
3. Temporary WC

Permanent WC Short-term
Financing

Long-term
Financing
`
4. – 6 Fill the WCFP matrix below with the appropriate
Working Capital. Use the following words given below.

WCFP Short-term Long-term

Financing Financing
a) Maturity Matching Temporary WC Permanent WC

b) Conservative Some Temp. WC

Temporary WC
Permanent WC
c) Aggressive Temporary WC
Permanent WC
Some Perm. WC
Temporary WC Some Temporary WC
Permanent WC Some Permanent WC
MANAGEMENT OF WORKING CAPITAL ACCOUNTS

ACCOUNTS RECEIVABLE
What is Accounts Receivable?
 What is Accounts Receivable?

Why do we need to maintain this account?

CREDIT FACILITY
Concept of selling and rendering of goods and services on
account or on credit payable within the specified period.
CREDIT FACILITY
Concept of selling and rendering of goods and services on
account or on credit payable within the specified period.

Is it possible for a business to sell goods

and services without incurring credits?
“PWEDENG UMUTANG BUKAS”
NO CREDIT FACILITY

NOT applicable for

Big Businesses
NO CREDIT FACILITY

NOT applicable for

Big Businesses
 Give examples of businesses
which will NOT require a credit
facility.
Name some businesses which
credit facility is
REQUIRED / NEEDED.
Consider the following
businesses:
REAL ESTATE
• Condominium
• Apartments
• Town Houses
 CREDIT MANAGEMENT
Management of accounts receivables and cash collections

Sales
Maturity Bad
A/R Date Accounts

Terms
Effective Cash Management requires accelerating
receivables collections.
Receivables control measures

1. Granting of discounts

2. 5 C’s of Credit Evaluation

3. Good Collection and Billing System

4. Aging of Accounts Receivable

CASH DISCOUNTS
 Encourage early payments

Benefits:
1. Early payments
2. Decrease in bad debts
3. Increase in sales

Disadvantage
1. Costly / Expensive
Collectability of accounts receivable largely depend on the
QUALITY of customers.
Collectability of accounts receivable largely depend on the
QUALITY of customers.

QUALITY OF CUSTOMERS
depends on the
STANDARDS or CREDIT POLICIES
set up and used by an organization.
 CREDIT POLICIES are integral part of CREDIT EVALUATION

5 C’s of CREDIT EVALUATION

- Character –the willingness of the borrower to repay the loan

- Capacity – a customer’s ability to generate cash flows
- Collateral – security pledged for payment of the loan
- Capital – a customer’s financial resources
- Condition – current economic or business conditions
GOOD BILLING & COLLECTION SYSTEM

 Insuring efficiency of collection follow-ups

 Management’s way of validating customers contact

details
AGING OF ACCOUNTS RECEIVABLE

 Control measure to determine the amount of the

receivables that are still outstanding and past due

1-30 DAYS 31-60 DAYS 61-90 DAYS OVER 90 DAYS

MATURITY CURRENT TOTAL
PAST DUE PAST DUE PAST DUE PAST DUE

Amount 60,000,000 20,000,000 10,000,000 3,000,000 7,000,000 100,000,000

AGING OF ACCOUNTS RECEIVABLE

 Control measure to determine the amount of the

receivables that are still outstanding and past due

1-30 DAYS 31-60 DAYS 61-90 DAYS OVER 90 DAYS

MATURITY CURRENT TOTAL
PAST DUE PAST DUE PAST DUE PAST DUE

Amount 60,000,000 20,000,000 10,000,000 3,000,000 7,000,000 100,000,000

MANAGEMENT OF WORKING CAPITAL ACCOUNTS

INVENTORY
INVENTORY MANAGEMENT
Inventory management involves the formulation and
administration of plans and policies to efficiently and
satisfactorily meet production and merchandising
requirements and minimize costs relative to inventories.
INVENTORY MANAGEMENT
Inventory management involves the formulation and
administration of plans and policies to efficiently and
satisfactorily meet production and merchandising
requirements and minimize costs relative to inventories

Effective inventory management becomes critical when

the nature of the products are either PERISHABLE,
FRAGILE, OR TOXIC.
INVENTORY MANAGEMENT
Proper inventory management involves the
determination of reasonable levels of inventories
considering the size and nature of business.
INVENTORY MANAGEMENT
Proper inventory management involves the
determination of reasonable levels of inventories
considering the size and nature of business.

Maintaining too much inventories has costs such as

CARRYING OR HOLDING COSTS
POSSIBLE OBSOLESCENCE OR SPOILAGE
INVENTORY MANAGEMENT
Proper inventory management involves the
determination of reasonable levels of inventories
considering the size and nature of business.

Maintaining too much inventories has costs such as

CARRYING OR HOLDING COSTS
POSSIBLE OBSOLESCENCE OR SPOILAGE

On the other hand, too low inventory can result to

stockout, and eventually lost sales.
INVENTORY MANAGEMENT

Concept of FIFO

FIFO FILO
First In First Out - - - First In Last Out
INVENTORY MANAGEMENT

Inventory must also be protected from losses arising

from damage due to natural and less natural causes.
INVENTORY MANAGEMENT

Inventory must also be protected from losses arising

from damage due to natural and less natural causes.

NATURAL causes
FLOOD
TYPHOON

LESS NATURAL causes

THEFT or PILFERAGE
INVENTORY MANAGEMENT

Inventory Insurances
Common protection of inventory/other assets.

Good Storage facilities

Systematic Audit
INVENTORY MANAGEMENT

Inventory must also be protected from losses arising

from damage due to natural and less natural causes.

NATURAL causes
FLOOD
TYPHOON