Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsBetween each stage of the working capital cycle, there is a time delay. Forsome businesses, there could be a substantial length of time to make and sellthe product. In these enterprises, a large amount of working capital will berequired to survive. Others may receive their cash very quickly after paying outfor inventory, perhaps even before paying their bills. Service businesses maynot be required to pay out cash for inventory and therefore, will need lessworking capital.The key to successful cash management is monitoring carefully all the stepsin the working capital cycle. The faster the cycle turns, the faster you haveconverted your trading operations back into available cash, which means youwould have increased the liquidity in your business and will be less dependenton cash or extended terms from external stakeholders such as banks, customersand suppliers.There are many ways you can make the working capital cycle move faster. Thefollowing sections provide information on how you can make the cycle movemore quickly and improve the cash fl ow in your business.48Chapter 2-5 p22-65 Eng.indd 488/15/11 5:01:56 PM