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