Strategies for Managing Working Capital

Subject: Strategic Management
Pages: 2
Words: 625
Reading time:
3 min
Study level: Bachelor

Working capital can be defined as the organization’s existing assets minus the current liabilities. The assets involve cash flow, short-term investments, accounts receivable, and inventories. Working capital management is a criterion critical to every organization in ensuring the firm is working proficiently. This is guaranteed when the one in charge monitors and utilizes the current liabilities and assets to benefit the company. Working capital is tasked with tracking three ratios vital to the firm, collection, working capital, and inventory ratios. When handled correctly, it can advance the organization’s profitability and earnings when the resources are used efficiently. As a manager, tasked with overseeing hospital assets, controlling accounts receivable is one of the best strategies in safeguarding capital approach in the health care sector. In most instances, when organizations cannot utilize their resources efficiently, they end to rely on the government for assistance. The help can take longer, making the firms face a backlash in the capital.

During and before treatment, it is not recommended to collect money from patients. The best advisable practice is informing the patient concerning their liabilities and accessing their credit cards to check for bank details upfront (Vuković et al., 2017). Informing the patient about the payment procedures, helps the firm increase its chances of improving receivables management. Maintaining a steady cash flow in such institutions is vital for every organization as it maintains the running of the daily projects smoothly. For any organization to achieve profitability, it is bound to follow the daily working capital needs thoroughly.

One request that should be awarded is to increase the pharmaceutical supplies because this is a daily necessity for every patient in the hospital. Pharmaceutical supplies can generate the firm more money when outpatients are referred to buy medications from the hospital. When one has workers that are well qualified for their work, it creates a name for the organization that patients will be referring others to where they received the best care and services.

From the pending requests, the elimination method was the most effective way of reaching the final decision on the working idea. Adding staff to the already existing workforce calls for increased monthly expenditures when paying the staff. This may cause problems because adding personnel when the organization cannot raise more capital will lead the organization to incur losses. The new Magnetic Resonance Imagery (MRI) machine would cost the firm much funds considering it is the latest technology. Supply chain advanced training would be vital, but momentarily it is not as important as taking care of patients’ needs.

When it comes to money circulation, pharmaceutical supply ensures continued circulation of capital in the firm as patients need medication daily. These products are easily converted into cash, ensuring smooth operations. While having many employees is vital, the main idea is to satisfy the patient service and improve the outcomes. In so doing, one can make use of the available practitioners instead of employing others. When you motivate the current ones with additional salary, they will produce better results. This ensures circulation of capital within the organization is maintained while experiencing minimal or no liabilities. With manageable working capital received from the pharmaceutical supply, one can venture into other ways of improving patient outcomes. Such ways include additional staff and acquiring the new technology MRI machine to reach the standards of other well-established hospitals.

One might note that, without any cash flow or liquid assets, a firm may remain stagnant to lose its clients, leading to closure. Any organization requires a strategic managerial staff that is well-versed in maintaining a steady cash flow for the company while reducing losses. One should look for ways to acquire assets outside the organizational base that can be used if there are shortages of cash.


Vuković, B., Andrić, M., & Jakšić, D. (2017). The impact of working capital management on company’s profitability: Empirical evidence from Serbia. Custos e Agronegocio, 13(1), 333-349.