Solutions to improve working capital efficiency in hanoi transportation and goods services jointstock company

MASTER THESIS Master in Finance, Banking, and Insurance (Southeast Asia) SOLUTIONS TO IMPROVE WORKING CAPITAL EFFICIENCY IN HANOI TRANSPORTATION AND GOODS SERVICES JOINTSTOCK COMPANY Supervisor: Nguyen Phu Hung (PhD) Student: Nguyen Thi Thanh Nga September 2017 ABSTRACT Title: Solutions to improve working capital efficiency in Hanoi Transportation and Goods Services Joint Stock Company Program: Master Finance – Banking – Insurance cooperated between National University, Hanoi (Vietnam) and Nantes University (France) Time for graduation: 2017 - 2018 Student: Nguyen Thi Thanh Nga Supervisor: Nguyen Phu Hung (PhD) When conducting a business, enterprise must have a certain amount of capital to establish the facilities corresponding to the selected business line That advance is called business capital in which there is a huge part of working capital Working capital is one of the two components of productive capital In the process of production, working capital plays an important role in the business Working capital usually accounts for a large proportion of capital in the enterprise Managing and using working capital directly affect the results of production and business activities of the enterprise Therefore, improving the efficiency of working capital is always the target of every business To achieve that target together with to ensure good quality, reasonable price, stable development in competitive environment, enterprises must constantly improve their production and business activities in which managing and utilizing working capital plays an important role and affects strongly to the production and business efficiency of enterprises Improving working capital efficiency, especially in production and business, is not a new issue; however, it is always a matter of survival of any enterprise Thus, for Hanoi Transportation and Goods Services Joint Stock Company, finding solutions to improve working capital efficiency is extremely essential Base on the analysis of current usage and management of working capital of the company, this thesis proposes specific solutions with the expectation of helping the company to maximize working capital efficiency Keywords: Capital, working capital, working capital efficiency ii ACKNOWLEGDEMENT First of all, I would like to extend my sincere thanks to my supervisor, Dr NGUYEN Phu Hung – ISVNU’s lecturer for his useful comments, remarks and engagement through the learning process of this master thesis Next, I would like to acknowledge and express my sincere gratitude to all the lecturers of Nantes University and International School, Vietnam national University, Hanoi for providing me the insight knowledge on all aspects of the major Finance, Banking, and Insurance Furthermore, my deepest appreciation also goes to the managers and staffs working at Hanoi Transportation and Goods Services Joint Stock Company who helped me to collect data for this research It has been a pleasure working with them Last but not least, I would like to give my deepest and greatest thanks to my family Their love and support have kept me going this far Student Nguyen Thi Thanh Nga iii LIST OF ABBREVIATIONS Hanoi Transportation and Goods Services Joint-Stock Company: HTGS LIST OF TABLES Table 4.1: Business results of the Company in the period 2014 - 2016 Table 4.2: Financial indicators in term of profitability and growth Table 4.3: Analysis of the structure of assets and capital of the company over the years Table 4.4: Financing Model Table 4.5: Working capital financing model of HTGS in 2016 Table 4.6: Situation on the fluctuation of working capital demand in 2016 Table 4.6: Fluctuation in short-term assets of HTGS Table 4.7: Volatility of cash and cash equivalents Table 4.8: Indicators reflecting the overall efficiency of working capital Table 4.9: Fluctuation of receivables in 2016 Table 4.10: Indicators assessing speed of recovering receivables 2015-2016 Table 4.11: Company's debt situation in 2016 LIST OF FIGURES Figure 1.2: Research process Figure 4.1: The organizational structure of the company Figure 4.2: The organizational structure of accounting divisions of the company iv TABLE OF CONTENTS ABSTRACT i ACKNOWLEGDEMENT iii LIST OF ABBREVIATIONS iv LIST OF TABLES iv LIST OF FIGURES iv TABLE OF CONTENTS iv CHAPTER INTRODUCTION 1.1 Problem statements Error! Bookmark not defined 1.2 The rationale of the thesis 1.3 Research Objectives 1.4 Research Questions 1.5 Objects and scope of study 1.6 Research methodology 1.6.1 Researching Methods …….6 1.6.2 Research Design 1.6.3 Data Collection 1.7 Values of the thesis 1.8 The structure of thesis CHAPTER 2: LITERATURE REVIEW 2.1 Study overview 2.1.1 Overview on international studies 2.1.2 Overview on domestic studies 10 2.2 Definitions 13 2.2.1 Definition of capital 13 2.2.2 Definition of working capital 15 2.2.3 Definition of working capital efficiency 16 2.3 Classification of working capital 18 2.3.1 In term of form and liquidity 18 2.3.2 In term of role of working capital in business stages 18 v 2.3.3 In term of ownership relationship 19 2.3.4 In term of capital formation 19 2.3.5 In term of time mobilizing and using capital………………………………………… 20 2.4 The factors affecting working capital structure 20 2.4.1 Factors affecting working capital structure 20 2.4.2 The meaning of improving the efficiency of working capital 25 2.5 Indicators for assessing the working capital efficiency 25 2.5.1 Indicators reflecting working capital efficiency 25 2.5.2 Indicators reflecting the overall efficiency of working capital 26 2.5.3 Working capital turnover rate… ………………………………………………… 27 2.5.4 Capital savings due to increasing speed of working capital circulation……… … 28 2.5.5 Average working capital to net sales ratio 29 2.5.6 Return on average working capital ratio 29 CHAPTER 3131 RESEARCH METHODOLOGY 31 3.1 Description of research object 31 3.2 Choice of research method 32 3.3 Research process 32 3.3.1 Data collection method 33 3.3.2 Using analytical tools 35 3.3.3 Comparative method 35 3.3.4 Analytic - synthetic method 36 CHAPTER RESEARCH RESULTS 38 4.1 General information about HTGS 4.1.1.The formation and development of the company………………………………38 4.1.2 The management structure of HTGS 38 4.2 The economic and technical characteristics of the transportation service business……… 41 4.2.1 General characteristics of the transport service business…………………………… 41 4.2.2 General information about the products of the transportation service business…… 43 4.2.3 Characteristics of transport service products…………………………………………44 4.3 Current status of utilizing working capital at HTGS…………………………………… 44 vi 4.3.1 General assessment of the company's production and business activities in the period from 2014 to 2016 44 4.3.2 Asset – capital structure of the company 47 4.3.3 Analysis of working capital efficiency at HTGS…………………………………… 55 4.3.3.1 Managing and using capital in cash……………………………… …….58 4.3.3.2 Situation of managing receivables………………………………………………61 4.3.3.3 Assess the situation and efficiency of inventory management………………66 4.4 An overview of the management and use of working capital in the company 64 4.4.1 Strengths 6466 4.4.2 Weaknesses working capital use 67 4.4.2.1 Weakness in the management and use of working capital 67 4.4.2.2 Weaknesses in mobilizing capital 67 4.4.2.3 Management of receivables 67 CHAPTER 67 SOLUTIONS TO IMPROVE WORKING CAPITAL EFFICIENCY IN HTGS 678 5.1 Business plan of HTGS in the future 678 5.2 Solutions to improve working capital efficiency at HTGS 6870 5.2.1 Plan working capital 70 5.2.1.1 Determine working capital demand to overcome the limitations in the management and use of working capital 70 5.2.1.2 Strengthen management of the use of capital in temporary idle cash 71 5.2.1.3 Improve effectiveness in inventory management, minimize inventory costs 7372 5.2.1.4 Use flexible commercial credit policy …………………………………… ……72 5.2.1.5 Apply measures to manage current assets in a scientific way……………………72 5.1.2.6 Speed up working capital rotation……………………………………………… 73 5.2.2 Search and select financial sources for working capital to overcome the limitations of Weakness in the management and use of working capital 73 5.2.3 Regularly monitor, evaluate and adjust debtswithin the implementing process 74 5.2.3.1 Monitoring, evaluating, regular adjustment of debt in the implementation process ………………………………………………………………………………………… 76 5.2.3.2 Management according to business characteristics of the company…………….76 5.2.3.3.Improve the financial management capacity of the professional workforce…….76 vii CONCLUSION 78 REFERENCES 77 viii CHAPTER 1: INTRODUCTION 1.1 Problem statements Hanoi Transportation and Goods Services Joint-stock Company has been established over 50 years as a state-owned company with initial capital provided from the State budget HTGS specializes in investments for goods transportation services, logistic service businesses, leveling urban transportation construction, etc The HTGS’s total capital in 2016 was 23,281 billion VND, of which working capital is 7,026 billion VND In recent decades, in times of persisting national budget deficits, issues of corporate finance for state-owned enterprises become a hot topic of reform Many Governmental studies found that shortfalls in “soft” state financing are often one of the key factors forcing to start restructuring, and consequently the Government has to accept adopting a more economical approach to help state-owned enterprise with financial requirements through better ways to control costs to achieve sustainable financial viability In the period 2014 to2016, though the HTGS made profits in business, its managing usages of working capital was assessed to not follow a really effective manner, affecting the company’s business operations in the incoming years Working capital (i.e., three most important being accounts payable, accounts receivable and inventory levels) is essentially necessary for a company to maintain its operations on a day-to-day basis in a stable way Managing working capital is one of the most important financial management tasks for state enterprises when Vietnam moves toward a market economy from a command-and-control model Efficient working capital management involves planning and controlling current assets and current liabilities so that to (i) respond to short term obligations and (ii) to avoid excessive investment in assets on the other hand Those that want to survive and prosper in the current market mechanism must improve the efficiency of management and usage of working capital in business This is not a new issue, but it has always been a big question for state enterprises and managers because of its vital importance determining business destiny Therefore, in order to achieve this goal, I will analyze financial indicators such as profitability and growth, asset structure - company capital, the company's working capital, short-term asset movements, debt restructuring, etc And I think that these will enhance the working capital management for the HTGS as subject of my thesis study 1.2 The rationale of the thesis The fisrt reason rerived from the important role of working capital for enterprises Working capital is a part of business capital, which is the most important element in the production and business activities, plays a decisive role in the production and business efficiency, thus determining the existence and development of enterprises For each enterprise, working capital is required to renovate technology and equipment, increase production scale, improve product quality, and enhance competitiveness Therefore, in the market economy, enterprises that want to survive must pay attention to the creation, management and usage of working capital, so that they can become the most effective in order to achieve profit maximization The second reason rerived from the inefficient management of working capital in Vietnamese enterprises In the context that the world economy and Vietnamese one have many fluctuations nowadays, Vietnamese enterprises have been facing difficulties in both managing and using working capital effectively, listed as follows: Efficient usage of working capital and reduced capital According to a recent assessment of Vietnam Report, the ROE of 500 Vietnamese largest companies (VNR500) is having the tendency to decrease steadily over the past three years The decline in capital usage efficiency is the most severe in telecoms and shipping businesses (with a 50% reduction in capital efficiency according to the VNR500 ranking chart from 2014 to 2016) Especially, while the usage efficiency of working capital and business capital has been decreasing recently, large Vietnamese enterprises still pay more attention to raising capital and increasing the scale of enterprises, instead of emphasizing on improving the efficiency and productivity of capital at the enterprise More than 60% of enterprises participating in a survey by Vietnam Report state that "the difficulty to manage, mobilize and use working capital as well as business capital" is in the top biggest difficulties of enterprises in the recent years from 2014 to 2016 Meanwhile, only less than 30% of enterprises think that "the lack of effective investment projects" is a big difficulty for enterprises within the next two years In addition, the company has a relatively good credit relationship with the Bank for Agriculture and Rural Development of Vietnam; therefore, the company has a relatively stable working capital formed from loans The company has a favorable business location; the headquartered is put in the center of Hanoi; the sale agents in many provinces in the country are located on the main roads Therefore, it is very convenient for transportation, transferring goods to the place of consumption which helps to ensure the continuous production and business process These locations also bring great advantages for the company in updating information regularly, promoting images and brands This will help the company to have appropriate plans, steps to prepare for the expansion investment business The company has highly qualified staffs and skilled workers The company also has made the appropriate business transfer steps, and is capable of raising capital With a professional team of accountants and financial experts, HTGS will have reasonable business strategies to improve the efficiency of managing and using working capital 4.4.2 Weaknesses working capital use 4.4.2.1 Weakness in the management and use of working capital The debt ratio on the total capital is quite high, so more or less the initiative on the capital of the company is reduced Despite that the solvency of the company is guaranteed, the way of stockpiling brings a barrier is that the company always has a certain amount of capital left, which can cause a waste of capital together with the reduction of the initiative in production and business of the company 4.4.2.2 Weaknesses in mobilizing capital Although the company has a large amount of capital, the company's capital is also occupied in a high proportion Receivables, payables as well as payment terms need to be carefully considered for each item and subject of payment in order to avoid financial inaction 4.4.2.3 Management of receivables In general, in the past year 2016, the managing activity of working capital of the company is not positive with some limitations presented as follows 65 The ability to manage and use the working capital of the company has not been effective leading to a decline in revenue and profitability while the cost is high The indicator on profitability, working capital turnover ratio is relatively low The company has not taken appropriate measures to save working capital as well as to expand the market and improve the efficiency of its business The management of receivables is not good Receivables account for the largest proportion of short-term assets; in 2016 this indicator accounted for 40.86% of total shortterm assets of the company The reason for the increase in receivables is that the company is applying the policy of selling large credit to create prestige and find partners This helps to increase sales of the company's products but at the same time it shows that the capital of the company is occupied largely If this situation lasts for a long time, the company will lack capital to put in circulation To ensure the amount of working capital in circulation, the company is forced to raise more capital and thus increase costs and reduce the company's profits In the year 2016, high inflation led to the increase in prices of inputs and outputs; the crisis and recession of economics caused the reduction in demand for consumption 66 CHAPTER 5: SOLUTIONS TO IMPROVE WORKING CAPITAL EFFICIENCY IN HTGS 5.1 Business plan of HTGS in the future The efficient use of working capital plays an important role in the process of remanufacturing to maximize profits for the company on the basis of following financial principles and state laws Improving working capital efficiency is a prerequisite for the company to create trust in customers and expand the market To that, it is imperative for the company to find out how to promote its strengths and overcome weaknesses in managing and using business capital HTGS offers transportation services and implements to install traffic lights, etc The company has carried out many works and has achieved encouraging results which creates material facilities as well as significant accumulations in the work of leading and directing Besides, these successes also assert that the operation direction of the company is on the right track and the company is able to meet all requirements of the market in and out of the industry with the fastest pace and high quality Therefore, the company has set the direction and tasks in the coming years as a guideline for the whole company to well fulfill its business objectives With the general orientation of building and developing the company to become a big unit, taking economic efficiency as a key measure for the sustainable development, the company is constantly promoting all resources to improve competitiveness It also constantly improves the material and spiritual life for its laborers Currently, the company still faces with many difficulties in production and business activities, many indicators are not as expected Therefore, the main objective of the company in the coming years must be related to the actual situation and be specified as follows: Strive to increase profit by measures of reducing the cost of production and materials, promote technical innovation and rationalize production In order to improve competitiveness and gradually dominate the market, the company must step up marketing activities to expand the market and diversify products The company also should apply advanced technology to production with the purpose of improving the productivity of product quality 67 Strive to affirm the brand name of HTGS, standardize the cost and implement well business strategy The product must be diversified; the service quality must be good and superior Improve the capacity of managers, technicians and skills of the workers The construction of traffic works, installation of traffic lights system must be on schedule, be ensured on the quality, working safety while the transportation costs should be reduced Improve the quality of service in a professional manner (from sales, customer care, goods quality to after-sales service) with the spirit of "We innovate to serve customers" to strengthen the competitiveness of the whole company Renovate business thoughts, working methods in the professional direction of each stage of production and business activities Set the suitable wage to each type of work; continuously increase the incomes for employees Research and expand the market; have aggressive market penetration Maximize and efficiently use sources in human, finance and stimulate the development of business 5.2 Solutions to improve working capital efficiency at HTGS 5.2.1 Plan working capital 5.2.1.1 Determine working capital demand to overcome limitations in the management and use of working capital The company needs to accurately analyze the financial indicators of the previous period, the main fluctuations in working capital, the difference between the plan and the implementation of working capital demand in previous periods Base on the determined working capital demand, define the capital mobilization plan: determine the current financial capacity of the company and the amount of capital shortage; compare the cost of mobilizing capital from financial sources to select suitable and timely capital mobilization channels; avoid excessive capital which causes waste or lack of capital disrupting the business operation of the company; limit the probable risks When planning working capital, it is necessary to base on the business capital plan by analyzing and calculating the economic and financial indicators of the previous period together with the forecasts on business performance, growth prospects in coming year and market volatility projections 68 5.2.1.2 Strengthen management of the use of capital in temporary idle cash Analysis shows that capital of a company accounts for a relatively large proportion (21.9% working capital) Therefore, the management and use of capital in cash is important for the business operations of the company in general and the use of capital in particular In 2016, the amount of money the company focused mainly in banks (VND 2.9 billion accounting for 61.46%) With such large bank deposits, the company has lost the opportunity to invest in other promising businesses such as finance and real estate 5.2.1.3 Improve effectiveness in inventory management, minimize inventory costs The stockpiling of the year is still much; the proportion of capital in inventory in the total working capital of the company is relatively high The company's inventories over the years are mainly in the form of unsold inventories and a large part of these is in the process of entering into contracts with customers, not coming to the consumer and not to the process of transfer ownership The characteristics of inventory are very easy to damage, loss and reduce the value of goods To minimize risk and improve inventory management efficiency, the company needs to: - Business planning: On the basis the year report, the company sets up business plan in detail in term of quantity, quality each month and quarter The company also should check the quality of goods upon export or import If the goods are at poor quality, the company must ask the sellers to compensate for damage and ensure the quality of goods and services when providing to customers - Good management of inventory: Monthly, accountants need to check books, find out the number of unsold goods to handle, find measures to release the number of unsold goods as well as strengthen the inspection, and manage well the inventory of the company to accelerate the ability to recover capital - Often monitor the fluctuation of the market: HTGS is currently doing business and supplying to the market many different services In a market economy, market volatility as well as competition among competitors is very high, requiring the company to closely monitor market fluctuations to ensure to supply the goods and services that the market needs This is an important solution to preserve the company's capital 69 5.2.1.4 Use flexible commercial credit policy In order to effectively manage the company's working capital, the company needs to complete and supplement the commercial credit policies in general and the working capital policy in particular in each business period as follows: Price policy must be improved: a reasonable price policy must be developed Determining reasonable price can bring competitive advantage to the company Improve the reasonable capital distribution policy for business projects, prioritize capital for projects with high profitability, and avoid the scratch in distribution of capital Add cost savings policy: the company should develop policies on saving production costs, circulation costs, etc Regulations on reward and punishment in the use of cost which is safe, efficient or waste with the purpose of improving company’s performance Formulate the policy of training and retraining employees: under the current market economy, technology and people are the two basic factors that determine the effectiveness of work performance in enterprises At HTGS, training, retraining and remuneration for employees are still weak with no specific policy Therefore, the company must find all measures to develop effective policies of training, fostering human resources to encourage employees to actively work, increase productivity and improve business efficiency 5.2.1.5 Apply measures to manage current assets in a scientific way The company should strengthen the management of working capital associated with the management of current assets of the company including cash and securities liquidity management, inventory management; receivables management The company should consider models of asset management in a scientific way It can purchase asset management software, or send employees to attend courses training skills in current asset management in order to find out the effective, scientific models which are suitable to the current economic and technical conditions of the company Good working capital management will create favorable conditions for the company to take timely measures to solve arrived problems in order to ensure the implementation of the working capital plan, avoid losses and wastage from which improve working capital efficiency 5.2.1.6 Speed up working capital rotation Business cycle of the enterprises depends on the length of each stage which is storage, production and circulation When enterprises apply scientific and technological advances to 70 production, they will ensure the production with high quality, high productivity and low prices This means that the time of production stage will be shortened Therefore, the company must be equipped with modern means of transport, machinery and equipment, modern science in order to meet the needs of transport and travel of customers while creating qualified services, accelerating sales growth, reducing inventory, improving overall turnover, accelerating and streamlining the company's working capital rotation These will help the company to take the initiative in reserving, managing and using working capital 5.2.2 Search and select financial sources for working capital HTGS operates mainly from external sources in term of capital, so the company should be flexible in finding and connecting partners based on selection criteria of the company in the form of the following: - Issuance of corporate bonds: It comes from many potential financial institutions (investment funds, companies and insurance groups, finance ) and legal procedures are not too complicated The company can apply flexible interest rates as well as many interest and principal repayments When issuing bonds, the Company does not have to mortgage its assets; Bond financing is cheaper than other loans However, the company must pay the full amount at the maturity date as committed in the contract at a fixed interest rate In addition, the company must ensure that the cash flow associated with debt is not negative - Bank loans: In recent years, in the face of demand for business capital, bank loan is an important source of capital for the company Bank credit capital is actually an additional capital rather than a regular source of capital, which forms the working capital of the company On the other hand, the company should also mobilize medium- and long-term capital because the use of short, medium and long-term loans will contribute to reduce temporary difficulties in terms of capital, partly reduce costs and increase profits However, in order to mobilize capital from banks, the company also needs to set up business plans, feasible investment projects submitted to banks, pay principal and interest on time, create trust in banks - Borrowing investment funds: A new trend with a certain fund life cycle and guaranteed cash flow for a certain period of time The presence of funds known as major shareholders will increase the value stock of the company However, the company must 71 demonstrate strong financial strength, good governance and human resources, feasible business strategies and high growth potential - Joint venture capital: This is a form of cooperation which helps the company not only raise capital for business activities but also learn management experience and acquire scientific and technical progress and technology transfer The aim is link to focus resources, work together to solve the problem of capital mobilization and management will be more tightly, more specialized in different areas At the same time promote the diversification of activities The projects will be deployed easily, quickly because of more capital, not heavily dependent on bank loans - Occupying capital: In essence, these are payables to sellers, prepays from buyers and other payables This can not be considered as the main source of capital, but when using this source of capital, the company does not have to pay the cost of using it However, not because of this characteristic that the company should abuses it The reason is that this source of capital can be only temporarily occupied by the company - Capital mobilized from members of the company: Based on the individual financial potential, the members mobilize capital according to the progress of project implementation This fund is usually mobilized in the years when the new project is implemented When new projects are in place, the demand for capital of the company is high, the capital of the company does not meet the demand, while the credit for the project does not know the result of high risk you Funding from members is an effective option to cover the company's shortfall in the year and to create a link between the company and its members In order to mobilize sufficiently, timely and proactively capital in business, the company should take the following measures: (1).Develop a business plan for the next 3-5 years as well as a financial plan to support the production and business plan The plan should be specific, realistic, not drawn, no investment spread Demonstrate the purpose of using capital by giving business results and return on equity in the past year and outlook for next year This information includes (a) a summary of company information: history of establishment, structure of organization, products and services, sales and distribution networks, management, ownership structure, business results, financial position (b) comparison with some competitors: business results, revenue, profits, 72 financial indicators ROE, ROA, debt / equity , (c) financial model, cash flow forecasting, enterprise valuation; (2) Establish a board responsible for this issue This board will negotiate with the investor and work with the consultant on behalf of the board of directors; Reinforce the system of accounting books, restructuring (subsidiary and business sector) if necessary to ensure transparency and neatness when investors learn more about the business; (4) Auditing financial statements by a reputable international agency Establishing trust for capital providers by enhancing company credibility: Stabilizing and rationalizing financial, to pay debts on time; (5) Requests for necessary internal approvals (General Meeting of Shareholders, Board of Directors, Board of Directors, etc.) in accordance with the company's charter and the approval of the competent authority Securities, Stock Exchanges, Ministry of Finance, etc.) to be able to conduct trading activities; (6) There is support from financial consultants (for successful negotiation) & law in the process of mobilizing capital 5.2.3 Regularly monitor, evaluate and adjust debts within the implementing process 5.2.3.1 Monitoring, evaluating, regular adjustment of debt in the implementation process For retail customers, the company continues to implement a "buy off" policy, offers low discount to small but regular customers For large customers, before signing a contract, the company needs to classify customers, and thoroughly understand their solvency The contracts must always be strictly regulated in terms of time, method of payment and penalties when breaking the contracts to ensure safety Some points to be noted: - Open books tracking in detail the debts, arrange the receivables by time By this way, the company will easily know what is due soon and to be able to urge customers to pay The company should periodically summarize the consumption, check the customers who are owning in term of amount and time of payment, avoid the situation so that the receivables fall into the status of bad debt 73 - The company should apply financial measures to promote the consumption of products and limit the occupied capital such as payment discount and penalty for overdue payments - If the customer pays late, the company should consider specifically to make appropriate policies such as extending the time for paying debt or reducing the debt to maintain the existing relationship and only ask for the support of authorized organization when all of those above solutions not bring back the result - When buying or paying in advance, paying full, the contracts of insuring bought property must be made in order to avoid loss or damage of goods on the principle of “full deliver, full pay” or the imposition applied in the contracts 5.2.3.2 Management according to business characteristics of the company With the main characteristic of the trucking business, the company needs to focus on the management of the vehicle utilization coefficient, maintenance, repairs and management of spare parts, especially is running fuel (gasoline) + Vehicle usage ratio: The company needs to find customers and sign contracts with partners with stable sources, rationalizing the two-way transportation in the use of cars, not to run without one-way + Maintenance: There should be regular maintenance to reduce damage, reduce maintenance costs and reduce vehicle usage when the car breaks down in the workshop + Fuel management: The company needs to calculate and apply technology to have reasonable fuel consumption on the road Encourage the drivers to to the slogan "Love your car as your a child, save gasoline as the blood", Launching the campaign to save fuel consumption, organizing contest of innovations in fixing and repairing errors and shortcomings with the shortest time In terms of management, these are small actions that directly affect the company's working capital 5.2.3.3 Improve the financial management capacity of the professional workforce Human resource is always recognized as an important factor that determines the success of each business The use of working capital is a part of the financial management of enterprises, which is carried out by financial staffs Thus, the professional capacity of these staffs directly affects the financial management in general and working capital efficiency in particular 74 In order to efficiently manage its working capital, the company must have a policy of recruiting skilled labors The financial staffs must be recruited carefully in both term of quantity and quality in order to well manage and use capital of the company Every year the company needs to organize additional training courses and improve financial knowledge and skills for its staffs to ensure and maintain the high quality of financial staffs so that they can manage the finance issue of the company in a scientific way, obey strictly the accounting and statistical orders, the circulars, the guidance on the financial regime of the State The company also needs to manage its financial issue strictly together with specific assignment in financial management and the flow of working capital to ensure the initiative and efficiency in performance for each employee as well as that of the whole company 75 CONCLUSION In the trend of international economic integration, the competition is becoming increasingly fierce not only among domestic enterprises but also with foreign enterprises in all aspects such as technology, management, products services, quality, etc However, the key factor determining the business performance of an organization is assessed through the use of business capital and working capital Therefore, the study of solutions to improve the working capital efficiency is one of the key to successful organization In production and business activities, in order to win the competition and develop stably in the market economy, HTGS has always paid due attention to the management and use of working capital in order to continuously improve the efficiency of using capital of the company Although there have been many significant achievements in the improvement of working capital efficiency of the company, the working capital management activity of the company still has limitations that need to be overcome Based on the analysis of the current situation of working capital efficiency at HTGS, the author has suggested some solutions to improve the working capital efficiency of the company with the expectation of contributing a small part to improve the efficiency of production and business activity in general of the company In the coming time, to improve the efficiency of using working capital of the company, one of the inevitable requirements is the need to coordinate from three sides: Board of Director - Administrative Department–staffs specializing in finance issue It is necessary to set up a department in charge of managing working capital efficiency in order to ensure proper and adequate quantity and quality of working capital as well as effective use of working capital with the purpose of achieving the business goals set by the company 76 REFERENCES Documents in Vietnamese language Tran Duc Loc (2004), 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Corporate Finance, McGraw Hill, Inc,Australia 79 ... working capital efficiency is With the study on working capital, working capital efficiency and indicators for assessing working capital efficiency, the importance of working capital in the production... of working capital, as well as other existing research results, in order to apply into researching the topic in practice at Hanoi transportation and goods services Joint-stock Company 2.2 Definitions... enterprises: Capital on inventories is mainly the value of all kinds of reserve goods 2.3.2 In term of role of working capital in business stages Working capital is divided into categories: Working capital