Working Capital
Post on 14-Jun-2015
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Impact Of Marketing Policieson the Firm’s Working Capital
The Task
Main objective - to understand the Impact Of Marketing Policies on the Firm’s Working Capital
Policies to Manage working capital
Storage/ Warehouse Management
Credit Policy
Overall receivable Management
Credit Worthiness
Credit Rating
Sections Covered
Company
Distributer/Stockist
Retailers
Consumers
Direct Promotion to Sell the product
12
Indirect Promotion to Support chain
Equity
SelectMasse
s
The Scenario
There are Two types of warehouses• Pre-Product (to Store Raw Material)• Post Product (to Store the Finished Goods)
Warehouse Management
Controlling the cost by keeping track of warehouse requirement according the type & complexity of the product
Determining the need of a warehouse based on the companies spread across the country and its distribution network
Controlling the warehouse cost by appointing 3rd party warehouses and reducing the fixed investment
Measure taken
The level of the cash flow is determined by the credit policy
The firm’s credit policy determines the amount of receivables & payables
Credit policies are designed by the CFO
It varies in accordance to the spread and the depth of the product
Credit limits depends on the complexity of the product For Chemical industry – Credit limit for the creditors / row material
suppliers usually high.
Credit limits also depends on the Equity of the company Hindustan Unilever Reckitt Benckiser Amul Abbot
Credit Policy
All these big companies dictates the margins
Marketing Impact:
Control the relationship with distributors and help retailers to sell the product by promoting it.
High demand of the product directly impacts the trade relationship and credit line
Monitoring the sales done by sales team and keeping the track of inventory pushed to distributors
Making sure that there will be no-stock returns and sale to end consumer happens
This way Distributors adhere to the credit timeline.
Measure taken
• Working Capital can be significantly managed if the amounts owing to a business are collected faster.
• Every business needs to know.... Who owes them money.... How much is owed.... How long it is owing.... For what it is owed.
• Late payments eat away profits and can lead to bad debts.
• If we don't manage debtors, they will begin to manage your business as we will gradually lose control due to reduced cash-flow
• and, of course, we could experience an increased incidence of bad debt.
Receivables Management
Marketing Impact:
Making sure that credit policies are clearly understood by sales staff, distributors.
Incentivizing the distributor s if they pay before the assigned credit period
E.g. at the end of the year - 1% of the total payment made before due date
Consider accepting credit /debit cards as a payment option.
Measure taken
Marketing creates demand through promotion & advertising which in turn creates the much needed corporate equity.
This translates into Equity & Goodwill amongst debtors & creditors which impacts Credit worthiness of the company
Through this credit worthiness, company is able to impact financial decisions
Credit Worthiness
Credit worthiness in continuum results in a credit rating
Marketing is able to impact credit rating by creating corporate equity through its activities in the mass/consumer arena.
Credit rating is a critical parameter for a financial reputation of the company amongst its suppliers, business partners and bankers
Credit Rating
Company
Distributer/Stockist
Retailers
Consumers
Direct Promotion to Sell the product
12
Indirect Promotion to Support chain
Equity
SelectMasse
s
Conclusion
• Credit Rating
• Credit Worthiness
• Storage/ Warehouse Management
• Credit Policy
• Overall receivable Management
Thank You
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