Working Capital Needs Assessment due to Business Seasonality in the Logistics Company

Abstract

The growth of the company's business is generally followed by an increase in the company's revenue. However, to achieve revenue, the company require capital to finance the cost of goods sold, salary expenses, and other expenses before the sales happened. The cost of capital is generally the cost that the company first incurs compared to revenue or cash collection. The impact of costs must be paid in advance or early, while on the other hand cash collection from a customer is received later. If this situation continues over a long period and a bigger amount over time, this condition will make the company hampered to maximize the revenue due to the lack of cash.   In this analysis using an international forwarding company in the export and import logistics industry, this company is still small and medium and has limited capital. In the last 5 years, the company has continued to experience an increase in sales from year to year, but due to limited capital, the company cannot fulfil all requests from customers due to maximizing the revenue because of the high cost of goods sold that should be paid first or early. In addition, in this industry, the profits that are generated by companies are tight, so companies tend to avoid bank loans in funding their operational activities. In the operational activities of this company, there is also a difference in the timing of receiving money from customers, which tends to be longer than the difference in payment times. The impact is that even though the company appears to have high liquidity, the company still cannot accept all customer requests because the company's assets are receivables. This is also exacerbated because the logistics business has seasonal sales that depend on global economic activity. In a high sales season, the company tends to have no cash, while in a low sales season, the company has a lot of cash but is not productive. Furthermore, if the company decided to invest the money for expansion, currently the company did not have any calculation of cash required to take all potential revenue in the future.