Reduce working capital and increase profitability: Using electronic payments

Efficient working capital management is important for firms to stay in the business and increase the profitability. This paper looks at the relationship between working capital management components as measured by cash conversion cycle approach and profitability measures and then looks at how emerging electronic payment options are helping firms in India to improve the accounts receivable days (DSO). By grouping the firms electronic payments adoption into high, medium and low, analysis of variance is done to determine if indeed the means of working capital management components (AR days, AP days, inventory days and cash conversion cycle) are different for firms with different adoption levels and the results are presented along with a few additional related aspects.