Effectiveness of Working Capital Management on MSME Sustainability in West Bengal

MSMEs are the driving force of developing countries like India. The basic nature of being labor-intensive rather than being capital intensive allows them to be most sought for the sector in countries like India where the average age of the population is around 40 years. Employment generation is one of the major issues in India, and MSMEs are successfully meeting that need. Now to successfully operate in a competitive world, enterprises need to have enough liquidity to meet its current liabilities. This liquidity management is the basic thought behind working capital management. Every enterprise needs to protect its liquidity position as illiquidity will land them into the vicious circle of shut down. The effectiveness of working capital management is that it not only allows firms to maintain their liquidity position but also it manages the credit collection and inventory management in such an effective way so that the firm never goes out of liquidity. While in large organizations, there are dedicated people to look after this process, MSMEs often suffer in this area along with others as most of them are either first-generation entrepreneurs or do not have any business background or education which allows them to effectively manage this process. Most of the firms are not having computerized modes of operation so that they can get the consolidated record. This study aims at finding out the level of awareness about working capital management needs for the MSME firms and the different sources of working capital measurement and their effectiveness in one of the largest industrialized districts of West Bengal, Kolkata, which is also the capital city of the state.