Working Capital Policy
Running head: LAWRENCE SPORTS WORKING CAPITAL POLICY
Lawrence Sports Working Capital Policy Paper
Lawrence Sports didn’t properly use a cash management system. This was one of the main reasons they had a hard time managing their finances. A cash budget is “the most important financial statement” a company can have. If a cash budget is correctly done it can provide a company with the necessary “checks, balances and financial stability” to keep them successful. It can also keep them in good standing with lenders and keep their spending and investment impulses in check. The manager of Lawrence Sports finds the company in a complex position following defaults as well as delays on accounts receivables from the Mayo Stores. As a result of these delinquent payments Lawrence Sports has fallen into a deficit which has forced the company to take out large bank loans with high interest. Lawrence Sports need to develop a cash budget that will provide them with the proper checks and balances that will keep them profitable. First, they need to set some business guidelines and goals. This will give them a working knowledge of what is expected of the organization as a whole. They need to reexamine their current economic and business conditions and make the necessary changes to better their current financial situation. Corrected forecasted sales for each budget period, would allow them the opportunity to know what their expected expenses and revenues will be giving them a chance to prepare a profit and loss projection. If Lawrence Sports would have ran a “reality check” on their numbers; comparing them to their goals, they would have been in a better position knowing what they needed to do to collect on their receivables and pay out their payables projecting monthly cash flows and outflows. Periodically Lawrence Sports will need to review their performance and make any necessary adjustments to stay operable.
Working Capital...
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