Important points for Working Capital Cycle
A lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover of debtors and stock and lengthy stockholding period and debtor's collection period.
The working capital cycle can be reduced in any of the next ways like:
1. Negotiate for a longer credit duration along with the suppliers
2. Reduce the stock conversion duration or manufacturing duration.
3. Reduce the debtor's collection period via granting short crediting duration. This can be achieved throughout offering discounts to encourage to customers them to pay earlier.
4. Holding fast moving goods to ensure high turnover.
5. Timely delivery of raw materials via suppliers especially whether any delay in delivery will lengthen the raw materials holding duration.