Working Capital Management: Introduction
- Working capital management is a type of business strategy, essentially designed to monitor a company’s current liabilities or assets to maintain sufficient cash flows, in order to meet short-term debt obligations and short-term operating costs. Working capital management mainly involves tracking three main ratios that include the collection ratio, the working capital ratio, and the inventory turnover ratio.
- Furthermore, working capital management can improve a company’s profitability and earnings by making efficient use of its resources.
Global Working Capital Management Market: Dynamics
Global Working Capital Management Market: Key Drivers
- Surge in demand for working capital management among organizations to maintain sufficient cash flow is a key factor likely to accelerate the market in the next few years.
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- Growing need for working capital management to maximize business operational efficiency, due to rising adoption of temporary working capital is projected to boost the growth of the working capital management market across the globe.
- Businesses or industries that deal in the manufacturing of products that have seasonal demand and need to maintain seasonal working capital is expected to fuel the working capital management market.
- Increase in adoption of working capital management for granting credit to customers, managing short-term investments, managing inventory, and managing payables to avoid over-borrowing, is expected to create new opportunities for the working capital management market during the forecast period.
Global Working Capital Management Market: Restraints
- Inadequate working capital is one of the major factors which can have a negative impact on the growth of the working capital management market. Besides, growing security and privacy concerns are likely to obstruct the growth of the global working capital management market during the forecast period.
Impact of COVID-19 on the Global Working Capital Management Market
The COVID-19 outbreak has been a major challenge for the post-pandemic business environment. Governments of different countries across the world have imposed lockdowns to curb the spread of the disease. Hence, increase in credit risk with more reported insolvencies, defaults, and bankruptcies during the pandemic outbreak (due to disrupting financial markets) is expected to enhance the growth of the working capital management market. In addition, the pandemic outbreak has increased the short-term, medium, and long-term cash needs of people for reducing financial disruptions in these challenging times and has raised the demand for working capital management extensively across both developed and developing countries during the pandemic outbreak to enhance trade receivables. This in turn is expected to drive the growth of the working capital management market during the COVID-19 outbreak.
