Lawrence Sports Working Capital Policy Paper
Operating a business with a balance in capital management is essential to every business whether small or large. A constant vigil over how much money comes in and how much money goes out, as well how much money is tucked away must be maintained. A business could find itself at a production standstill or even bankruptcy because of a lack of cash. Lawrence Sports lacks capital working policies as well as broad selection of customers and suppliers.
Working Capital Policy
A vital tool in an effective capital working policy is cash budgeting. A cash budget is a way to monitor a businesses cash inflows and outflows, which in turn assist in predicting a company's ability to pay debt, expenses and can be used in planning short-term credit needs (Score, 2007). Lawrence Sports has a credit line with high interest rates. The company is in a constant state of worry in regards to paying off the loan without borrowing any more money. The impact is felt amongst the company's customers and suppliers. Lawrence Sports relies on on-time payments from the customer, stretched out payments to the suppliers and a credit line with high interest rates. The company appears to act more out of panic versus long termed planning that can help maintain control over the finances.
Lawrence Sports needs to monitor the time between cash inflows and cash outflows. For example: Since Lawrence Sports main cash source is from Mayo, Lawrence Sports needs to monitor how long it takes from the time materials are ordered for Mayo and how long it takes for Mayo to make the final payment. A cash budget would assist in showing when cash is needed to pay bills.&nb ...