Without planning, an organization can expertise a lack of funds to pay suppliers as they spend on inventory earlier than receiving money from sales. In other phrases, even a quickly rising firm can undergo cash move issues because of working capital needs. A company should also determine the extent of stock which allows for uninterrupted production, however reduces the investment in uncooked materials – and minimizes reordering prices – and due to this fact increases money circulate. Management ought to establish the appropriate credit score coverage in order that any impression on money flows and the cash conversion cycle shall be offset by increased revenue and return on capital.