Tag Archives: crisis

Edition 38, Finance

Does your Business Operate with a Mentality of Strengthening Working Capital?

By: Luis Manuel Gomezchico and Francisco Alvarado

You survived the crisis… now what?

During an economic crisis, when credit markets shrink, many companies quickly change their strategy to maintain their working capital. With an eye to the short term, they may take actions like delaying payment to vendors as much as possible, while trying to make payments right at the deadline, or minimize inventory restocking. All of this in order to scrape together as much cash as possible to keep operations going. But we know that these actions are not sustainable.

When the crisis is over, the challenge faced by many organizations has less to do with survival than how to improve their working capital to fund investment and resume growth. To do so, they will need to introduce actions that are sustainable in the medium and long term, to manage their inventories and accounts receivable and payable processes in order to have the right impact on their working capital (Figure 1).

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