Working capital represent that part of the firm’s investment which makes the business becomes operational. Thus, its management is crucial to ensure the continued flow of resources and for the survival of the firm. Kolay (1991) pointed out that systematic planning for adopting suitable short and long term strategies to manage and avoid future working capital crisis situation is crucial. A shortage of working capital usually forces organisations to take actions that might further aggravate the working capital position.
A poor WCM can affect all areas of the firm’s operations, creating problems such as delay in production, accumulation of unpaid invoices, suppliers withholding delivery against payment of long outstanding bills, unable to meet interest charges, thereby escalating the level of outstanding debt, postponing major repairs and maintenance among others. According to Kolay (1991, p. 46) ‘this may affect the availability of inputs, thereby lowering capacity utilisation, worsening internal cash generation and, consequently, worsening working capital position’
