Working capital management in the small and medium-sized enterprises Case: Project-based business environment in Flowrox Oy

This Master´s thesis illustrates how growing a business ties up the company´s working capital and what the cost of committed capital. In order to manage a company´s working capital in rapid business growth phase, the thesis suggests that by monitoring and managing the operating and cash conversion cycles of customers´ projects, a company can find ways to secure the required amount of capital. The research method of this thesis was based on literature reviews and case study research. The theoretical review presents the concepts of working capital and provides the background for understanding how to improve working capital management. The company in subject is a global small and medium-sized enterprise that manufactures pumps and valves for demanding process conditions. The company is expanding, which creates lots of challenges. This thesis concentrates to the company´s working capital management and its efficiency through the supply chain and value chain perspective. The main elements of working capital management are inventory management, accounts receivable management and accounts payable management. Prepayments also play a significant role, particularly in project-based businesses. Developing companies´ working capital management requires knowledge from different kind of key operations´ in the company, like purchasing, production, sales, logistics and financing. The perspective to develop and describe working capital management is an operational. After literature reviews the thesis present pilot projects that formed the basis of a model to monitor working capital in the case company. Based on analysis and pilot projects, the thesis introduces a rough model for monitoring capital commitments in short time period. With the model the company can more efficiently monitor and manage their customer projects.

Observations on Software Project Deviations

Software projects have proved to be troublesome to be implemented and as the size of software keeps increasing it is more and more important to follow-up the projects. The proportion of succeeded software projects is still quite low in spite of the research and the development of the project control methodologies. The success and failure factors of projects are known, as well as the project risks but nevertheless the projects still have problems with keeping the schedule and the budget and achieving the defined functionality and adequate quality. The purpose of this thesis was to find out what deviations are there in projects at the moment, what causes them, and what is measured in projects. Also project deviation was defined in the viewpoint of literature and field experts. The analysis was made using a qualitative research approach. It was found out that there are still deviations in software projects with schedule, budget, quality, requirements, documenting, effort, and resources. In addition also changes in requirements were identified. It was also found out that for example schedule deviations can be affected by reducing the size of a task and adding measurements.

Kassanhallinta kuntasektorilla -sovellus Etelä-Karjalan ydinkuntien likvidimpien varojen osalta

Tutkielmassa analysoidaan kunnan kassanhallinnan likvidimpien varojen prosessien toteuttamista, kun tavoitteena on kustannustehokkuuden parantaminen. Lisäksi selvitetään Etelä-Karjalan ydinkuntien eli Lappeenrannan, Imatran ja Joutsenon mahdollisuuksia tehostaa yhteistyötä taloushallinnon alueella. Työn teoriaosassa tarkastellaan kuntasektorin kassanhallintaa erityisesti myyntisaamisten ja ostovelkojen hallinnan osalta. Keskeistä on löytää prosesseista kustannuksia ja viivettä minimoivia menettelytapoja, joita olisi mahdollista hyödyntää kunnan kassanhallinnassa. Tehokkaassa kassanhallinnassa korostuu yhä enenevissä määrin informaatioteknologian rooli. Tästä johtuen tutkimuksessa kartoitetaan perinteisten menettelytapojen automatisoinnin mahdollisuuksia ja etuja. Empiirisessä osassa tarkastellaan kohdekuntien kassanhallinnan menettelytapoja sekä niiden yhtäläisyyksiä ja eroavuuksia. Lisäksi kartoitetaan yhteistyön lisäämisen mahdollisuuksia ja esteitä sekä määritetään käytetyn aineiston perusteella tehokkaan kassanhallinnan edellyttämät menettelytavat. Tutkimuksesta voidaan päätellä kuntien tavoittelevan joustavampia ja kustannuksia minivoivia kassanhallinnan menettelytapoja vaikka perinteisten menetelmien uudistaminen ei aina olekaan helppoa. Automatisointi ja prosessien virtaviivaistaminen on taloudellisen menestyksen ja kilpailussa mukana pysymisen edellytys. Tehokkuuden etsiminen tiiviimmän yhteistyön kautta olisi järkevää, mutta asenteet ja kontrollin menettämisen pelko estävät yhteistyöhön perustuvien suuruuden etujen saavuttamisen.

Voimalaitoksen toiminnallinen suunnittelu

Diplomityön tavoitteena oli antaa kuva vastapainevoimalaitoksen automaation toiminnallisesta suunnittelusta ja soveltaa teoriaa suunnittelemalla toiminnallisuus vesihöyrypiirin tärkeimmille osuuksille. Työssä on esitelty tyypillinen EPCM-voimalaitosprojekti, joka toteutetaan ulkopuolisen avustajan kanssa tehdyllä yhteistyöllä. Projektin koostuu laitoksen suunnittelu-, rakennus-, asennus- sekä käyttöönottovaiheista. Huomioitavia asioita ovat mm. projektin budjetti sekä aikataulu. Valvonnalla on suuri merkitys projektin onnistumiseen. Lisäksi työssä esitellään vastapainevoimalaitoksen vesihöyrypiirin prosessi, pääsäädöt sekä automaatiojärjestelmä. Vesihöyrypiirillä tarkoitetaan syöttövesi-, höyry- ja kaukolämpöjärjestelmää. Pääsäädöillä pyritään saamaan tuotanto vastaamaan kulutusta. Voimalaitoksen painopiste on kaukolämmön tuottaminen. Automaatiojärjestelmän toiminnoilla tarkoitetaan järjestelmän suorittamia ohjauksia, säätöjä sekä hälytyksiä. Toiminnallisessa suunnittelussa tehdään toimilaitteille niin yksittäisohjaukset, säädöt kuin hälytysluettelot. Työssä tehty toiminnallinen suunnittelu keskittyy erityisesti toimilaitteiden säätöpiireihin. Säätöpiirit koostuvat tärkeimmistä prosessiin liittyvistä komponenteista ja säätömerkeistä. Toiminnallisen suunnittelun dokumentaatioita käytetään automaatiojärjestelmän sovellusohjelmoinnin pohjana.

Saako historiasta selvää? Monikulttuuriset yläkoululaiset historian lähteillä historian taidot motiivien, seurauksien, historian tulkintojen ja lähteiden luotettavuuden arvioinneissa

The research assesses the skills of upper comprehensive school pupils in history. The focus is on locating personal motives, assessing wider reasons hidden in historical sources and evaluating source reliability. The research also questions how a wide use of multiple sources affects pupils’ holistic understanding of historical phenomena. The participants were a multicultural group of pupils. The origins of their cultures can be traced to the Balkan, the Middle East, Asia and Europe. The number of native Finnish speakers and pupils speaking Finnish as their second language was almost equal. The multicultural composition provides opportunities to assess how culturally responsive learning history from sources is. The intercultural approach to learning in a multicultural setting emphasizes equality as a precondition for learning. In order to set assignments at least to some extent match with all participants only those answers were taken into account which were produced by pupils who had studied history for a similar period of time in the Finnish comprehensive school system. Due to the small number of participants (41), the study avoids wide generalizations. Nevertheless, possible cultural blueprints in pupils’ way of thinking are noted. The first test examined the skills of pupils to find motives for emigration. The results showed that for 7th graders finding reasons is not a problematic task. However, the number of reasons noticed and justifications varied. In addition, the way the pupils explained their choices was a distinguishing factor. Some pupils interpreted source material making use of previous knowledge on the issue, while other pupils based their analysis solely on the text handed and did not try to add their own knowledge. Answers were divided into three categories: historical, explanatory and stating. Historical answers combined smoothly previously learned historical knowledge to one’s own source analysis; explanatory answers often ignored a wider frame, although they were effective when explaining e.g. historical concepts. The stating answers only noticed motives from the sources and made no attempts to explain them historically. Was the first test culturally responsive? All pupils representing different cultures tackled the first source exam successfully, but there were some signs of how historical concepts are understood in a slightly different way if the pupil’s personal history has no linkage to the concepts under scrutiny. The second test focused on the history of Native Americans. The test first required pupils to recognize whether short source extracts (5) were written by Indians or Caucasians. Based on what they had already learned from North American history, the pupils did not find it hard to distinguish between the sources. The analysis of multiphase causes and consequences of the disputes between Native Americans and white Americans caused dispersion among pupils. Using two historical sources and combining historical knowledge from both of them simultaneously was cumbersome for many. The explanations of consequences can be divided into two groups: the ones emphasizing short term consequences and those placing emphasis on long term consequences. The short term approach was mainly followed by boys in every group. The girls mainly paid attention to long term consequences. The result suggests that historical knowledge in sources is at least to some extent read through role and gender lenses. The third test required pupils to explain in their own words how the three sources given differed in their account of living conditions in Nazi Germany, which turned out to be demanding for many pupils. The pupils’ stronghold was rather the assessment of source reliability and accounts why the sources approached the same events differently. All participants wrote critical and justified comments on reliability and aspects that might have affected the content of the sources. The pupils felt that the main reasons that affected source reliability were the authors’ ethnic background, nationality and profession. The assessment showed that pupils were well aware that position in a historical situation has an impact on historical accounts, but in certain cases the victim’s account was seen as a historical truth. The account of events by a historian was chosen most often as the most reliable source, but it was often justified leniently with an indication to professionalism rather than with clear ideas of how historians conduct accounts based on sources. In brief, the last source test demonstrates that pupils have a strong idea that the ethnicity or nationalism determines how people explained events of the past. It is also an implication that pupils understand how historical knowledge is interpretative. The results also imply that history can be analyzed from a neutral perspective. One’s own membership in an ethnical or religious group does not automatically mean that a person’s cultural identity excludes historical explanations if something in them contradicts with his or her identity. The second method of extracting knowledge of pupils’ historical thinking was an essay analysis. The analysis shows that an analytical account of complicated political issues, which often include a great number of complicated political concepts, leads more likely to an inconsistent structure in the written work of pupils. The material also demonstrates that pupils have a strong tendency to take a critical stance when assessing history. Historical empathy in particular is shown if history somehow has a linkage to young people, children or minorities. Some topics can also awake strong feelings, especially among pupils with emigrant background, if there is a linkage between one’s own personal history and that of the school; and occasionally a student’s historical experience or thoughts replaced school history. Using sources during history lessons at school seems to have many advantages. It enhances the reasoning skills of pupils and their skills to assess the nature of historical knowledge. Thus one of the main aims and a great benefit of source work is to encourage pupils to express their own ideas and opinions. To conclude, when assessing the skills of adolescents in history - their work with sources, comments on history, historical knowledge and finally their historical thinking - one should be cautious and avoid cut off score evaluations. One purpose of pursuing history with sources is to encourage pupils to think independently, which is a useful tool for further identity construction. The idea that pupils have the right to conduct their own interpretations of history can be partially understood as part of a wider learning process, justification to study history comes from extrinsic reasons. The intrinsic reason is history itself; in order to understand history one should have a basic understanding of history as a specific domain of knowledge. Using sources does not mean that knowing history is of secondary importance. Only a balance between knowing the contextual history, understanding basic key concepts and working with sources is a solid base to improve pupils’ historical understanding.

Towards Inter-organizational Working Capital Management

Working capital is an investment which is tied up into the inventories and accounts receivable and which is released with accounts payable. Due to the current business landscape with tightened financial conditions and finance markets, organizations emphasize efficient working capital management. With efficient working capital management, a company can reduce the need of finance, free up cash, increase profitability, improve liquidity, increase the efficiency of operations, and decrease (financing) costs. From the perspective of an individual company, efficient working capital management means decreasing inventory levels by shortening the cycle time of inventories, decreasing accounts receivable by shortening the trade credit terms and effective collection procedures, and increasing the level of accounts payable by paying the suppliers later. From an inter-organizational perspective, however, working capital should not be sub-optimized by a single company but holistic view to working capital management through the supply chain should be adopted to create value and improve performance together. The purpose of this research is to take academic research as well as practical management towards inter-organizational working capital management. The thesis discusses the benefits as well as mechanisms of working capital management in the inter-organizational context and has two main objectives: (1) to examine the effect of inter-organizational working capital management on performance in the value chain context and (2) to develop models of working capital management for internal as well as inter-organizational value chains. The results of the archival research conducted in the value chain of the pulp and paper industry and the value chain of the automotive industry indicate that companies can increase relative profitability by managing working capital comprehensively by taking into account all three components, and holistically though the value chain. Companies in the value chain benefit from different strategies in working capital management depending on the position of the company in the value chain. This can be taken into account in inter-organizational working capital management. The effects of inter-organizational working capital management actions on the financing costs of working capital were studied via simulations. Simulations also show that the value chain and individual companies benefit from an inter-organizational view to working capital management. Inter-organizational working capital management actions include for example: shortening the cycle time of inventories, reducing product costs, shifting inventories, shortening payment terms, and considering the cost of capital. The thesis also provides solutions for the practical requirements for tools to control working capital. The design science part of the research introduces the adjusted cash conversion cycle (ACCC) model for internal value chains, as well as models for working capital management in the inter-organizational value chain context: the working capital management model (WCMM) and the financial cycle time model (FCTM) designed in corporation and product levels respectively. This research contributes to literature on working capital management and interorganizational accounting. The research gives a holistic, inter-organizational view to the management of working capital. It advances the knowledge in working capital management on operational level, increases knowledge in the recently risen theme of supply chainoriented, collaborative working capital management, combines management accounting research with supply chain management research, and contributes to the demand of practical inter-organizational accounting methods. In addition, the research has strong practical focus as new managerial methods are introduced.

The Cycle Times of Working Capital: Financial Value Chain Analysis Method

Interest towards working capital management increased among practitioners and researchers because the financial crisis of 2008 caused the deterioration of the general financial situation. The importance of managing working capital effectively increased dramatically during the financial crisis. On one hand, companies highlighted the importance of working capital management as part of short-term financial management to overcome funding difficulties. On the other hand, in academia, it has been highlighted the need to analyze working capital management from a wider perspective namely from the value chain perspective. Previously, academic articles mostly discussed working capital management from a company-centered perspective. The objective of this thesis was to put working capital management in a wider and more academic perspective and present case studies of the value chains of industries as instrumental in theoretical contributions and practical contributions as complementary to theoretical contributions and conclusions. The principal assumption of this thesis is that selffinancing of value chains can be established through effective working capital management. Thus, the thesis introduces the financial value chain analysis method which is employed in the empirical studies. The effectiveness of working capital management of the value chains is studied through the cycle time of working capital. The financial value chain analysis method employed in this study is designed for considering value chain level phenomena. This method provides a holistic picture of the value chain through financial figures. It extends the value chain analysis to the industry level. Working capital management is studied by the cash conversion cycle that measures the length (days) of time a company has funds tied up in working capital, starting from the payment of purchases to the supplier and ending when remittance of sales is received from the customers. The working capital management practices employed in the automotive, pulp and paper and information and communication technology industries have been studied in this research project. Additionally, the Finnish pharmaceutical industry is studied to obtain a deeper understanding of the working capital management of the value chain. The results indicate that the cycle time of working capital is constant in the value chain context over time. The cash conversion cycle of automotive, pulp and paper, and ICT industries are on average 70, 60 and 40 days, respectively. The difference is mainly a consequence of the different cycle time of inventories. The financial crisis of 2008 affected the working capital management of the industries similarly. Both the cycle time of accounts receivable and accounts payable increased between 2008 and 2009. The results suggest that the companies of the automotive, pulp and paper and ICT value chains were not able to self-finance. Results do not indicate the improvement of value chains position in regard to working capital management either. The findings suggest that companies operating in the Finnish pharmaceutical industry are interested in developing their own working capital management, but collaboration with the value chain partners is not considered interesting. Competition no longer occurs between individual companies, but between value chains. Therefore the financial value chain analysis method introduced in this thesis has the potential to support value chains in improving their competitiveness.