Unit 5 Discussion/Student Response

Description

Initial Critical Exchange Forum Comment
Student initial critical exchange forum comments are due weekly by Wednesday. Initial response comments should approximate 300-350 words, and contain at least two outside scholarly reference sources.
Note that a total of 3 logins and 3 exchange forum posts are required on 3 separate days.
Students are required to research their selected forum topic, and then compile a 300-350-word response to the forum topic no later than Day 3 (Wednesday) of the week. A choice of critical exchange forum topics is assigned weekly. Students are expected to select an aspect of interest from the list of topics offered; students may also choose to combine topics. APA format is required. Submit your forum topic using the critical exchange forum assignment link.
Critical exchange forum topic response contributions will be critically graded on the thought quality of the response, work effort, research, and analysis.
Select one of the following forum topics to research and write about.
  Forum Topics(Select one)
Subjects: Working Capital Management; Short-Term Financial Planning
Working capital management
Receivables management
Inventory management
Cash management

Forecasting short-term financing needs
Student 1 Joash
Good Evening, Class, 
     According to an article in the South African Journal of Industrial Engineering, inventories are the most critical assets many organizations control, representing as much as half of the company’s expenses or even half of the total capital investment (Munyaka & Yadavalli, 2022). With many companies operating brick-and-mortar stores and online retail, the crucial challenge most organizations now face is a balanced demand supply that minimizes inventory costs and increases the satisfaction of their targeted customers (Munyaka & Yadavalli, 2022).
     In order to meet both the demand and maintain customer satisfaction, companies employ inventory management to ensure a good balance between the total cost of inventory and maintaining the desired customer satisfaction levels (Munyaka & Yadavalli, 2022). While that is only one aspect of inventory management, companies also use it to organize, secure, store, and distribute suitable materials of the right quality and quantity at the most opportune time and place to ensure adequate organizational performance (Munyaka & Yadavalli, 2022). 

    As stated previously, inventory management is very beneficial to many organizations. However, if it is accomplished poorly, it can cause enormous problems for the company. According to an article published by CIN7, poor inventory management can lead to higher holding costs, missed sales, uncertain cash flow, and more space to house excess inventory (Cin7, 2022). 
      In order to ensure inventory management is effective, companies are encouraged to fine-tune their forecasting, use the FIFO method (First in, First out), identify the low-turn stock, audit inventories, track inventory levels at all times, reduce equipment repair times, implement quality control, use inventory software, hire a stock controller and lastly, adopt a drop shipping method (Square, 2023). 
References:
Cin7. (2022, September 5). Inventory management best practices to increase sales – Cin7 blog. Cin7. Retrieved April 10, 2023, from https://www.cin7.com/blog/other/5-ways-bad-invento…
Munyaka, J.-C. B., & Yadavalli, S. V. (2022). Inventory management concepts and implementations: A systematic review. South African Journal of Industrial Engineering, 33(2), 15–36. https://doi.org/10.7166/33-2-2527
Square. (2023, January 28). Inventory management 101: How to manage small business inventory. Square. Retrieved April 10, 2023, from https://squareup.com/us/en/townsquare/how-to-do-ef…
Student 2Collapse SubdiscussionLisa Williams
Lisa Williams
WednesdayApr 12 at 2:46pm
Manage Discussion Entry
Critical Exchange Forum: Costs Associated with Inefficient Receivables Management 
Enormous costs can burden a business if receivables are not prudently managed. Receivables refer to dues that customers have not settled after purchasing goods on credit (Weygandt et al., 2020). A major cost is bad debts. When businesses extend credit to customers, the risk of default is commonplace (Weygandt et al., 2020). Customer defaults can result from many reasons. Whatever the case, customers’ defaults are majorly written off as bad debts. When such writing-off is done, the revenues the business initially anticipated are eroded, and so is the income. Thus, bad debts from receivables subject a business to financial loss.
Another cost associated with accounts receivables is opportunity cost. Opportunity costs, in this case, entail the opportunities a business has to forego because part of its money is stuck with customers (Weygandt et al., 2020). This means that a business, for instance, cannot expand if such an undertaking depends on receivables. Also, a business cannot develop new products if the development is reliant on receivables. These lost opportunities comprise the opportunity costs orchestrated by high levels of account receivables.
Financing costs can also arise from accounts receivables. Accounts receivables can easily affect the stability of a company’s operating capital, thereby pushing it to seek other mechanisms of financing daily operations (Owuor et al., 2021). One of these mechanisms is borrowing, which comes with interest costs. Interest costs would be additional costs to the business because they could be avoided if goods were paid on time.
The detrimental costs of inefficient management of receivables make it imperative for businesses to adopt rigorous credit management policies. These policies include creating a sustainable credit ceiling to avoid credit levels that may affect the normal running of the business and filtering risky clients (Weygandt et al., 2020). Through such policies, many of these costs can be avoided.
References
Berk, J. B., & DeMarzo, P.M. (2020). Corporate Finance (5th ed.), Pearson Education.
Owuor, G., Agusioma, N., & Wafula, F. (2021). Effect of accounts receivable management on financial performance of chartered public universities in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 3(1), 73-83. Retrieved April 11 2023 from https://doi.org/10.35942/ijcfa.v3i1.182Links to an external site.
Weygandt, J. J., Kimmel, P. D., & Aly, I. M. (2020). Managerial accounting: Tools for business decision-making. John Wiley & Sons.

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