Keywords: Cooperatives, working capital management, current assets, current liabilities, net working capital, Philippines
Introduction
Cooperatives are gaining importance in the local and international societies. They underwent developmental stages starting from addressing social, economic and political issues to bringing significant growth and sustainability in the society. In fact, they are serving as strong catalysts in which they bring impact to social, political and economic through a philosophically woven approach in doing business. They are institutions whose members are working collectively and they are motivated by strong self-reliance and social bond in order to meet their needs together. The members’ self-reliance can be observed in their ability to accumulate their savings and capital contributions in order to meet expected business requirements and assets. Indeed it is a rigid task for them to operate business since they rely on their pooled resources. However, if the members and their leaders manifest their collective efforts then they can probably attain their goals.
Yet cooperatives can rely on the collective efforts of their members, doing business is challenging in terms of dealing with both internal and external environment. Externally, they face competitions thus liquidity is not guaranteed. Internally, it requires managers to deal with sophisticated tasks that would require effective execution and coordination of activities related to managing assets and liabilities that are mainly focused on current assets and current liabilities. In reality, the core of business is about working capital management (WCM) that focuses on managing both current assets and liabilities. On the other hand, non-current assets and non-current liabilities basically support the working capital of cooperatives like storing and restocking of inventories and cash as well as to continuously sustain the normal business operating cycle.
Like any other businesses, cooperatives need to implement WCM and they have to upgrade the proficiency of their leaders and managers. WCM plays a significant role in the success or failure of any organization since it affects their liquidity, growth and profitability. Implementation of WCM allows the firm to generate cash and minimize their cost while ignoring it could negatively impact the firm’s liquidity risk and operating performance (Kroflin &Kratz, 2015). In the finance’ perspective, liquidity is about maintaining revolving cash in which inventories needs to be converted into cash for them to meet recurring expenses and repay their maturing debts. Growth can also be attained by cooperatives if they can sell their inventories at reasonable mark-ups thereby they can procure more inventories in the future. Profitability also goes with selling and restocking of inventories. WCM is also a method of ensuring accuracy and control of current assets and liabilities (Bragg, 2012). By implementing WCM policies, the managers are guided and internal control can be implemented in every type current assets and liabilities. Members will also have means of rechecking the activities of their leaders and managers whether they are working in the best interest of the members.
The study intends to assess the WCM of cooperatives in the Philippines since they are being viewed by the country as important institutions that can contribute to the economic growth of the citizens. In fact, the government through its agency, the Cooperative Development Authority (CDA), encourages their creation since they are viable partners in bringing social and economic justice. As defined by law (e.g. RA 9520), cooperatives are recognized as autonomous institutions that are registered and created with common bond of interest, who voluntarily joined together to achieve their social, economic and cultural needs and aspirations. In order to operate, the make equitable contributions to the capital required, patronizing their products and services and accepting a fair share of the risks and benefits of the business in accordance with the universally accepted principles of cooperatives. In as much as the Philippine government sees the importance of cooperatives, there is still a necessity to ensure that cooperatives adopt appropriate WCM policies and procedures in order for them to realize the governments’ vision for them and most importantly is to let cooperatives attain their collective aspirations.
Cooperative studies in the Philippines are in fact limited. Studies are focused on their current and historical statuses. Additionally, this study utilized a survey-method that directly assesses the WCM of cooperatives as compared with studies that utilized financial ratios generated from financial statements. Financial statements reflect the end-result of the management’s activities while survey-method allows us to understand internal information that occurs on a daily basis. Most often, information is only shared within the cooperatives and problems are resolved internally and there are few reliable references that cooperatives can access in order to improve their business operation. This study considers the case the Municipality of La Trinidad in the Philippines because their developments and their growth in number are remarkable. Their lines of businesses are also noteworthy because they were established to address and support communal needs. They are engage in financial intermediation, agriculture, horticulture, water refilling, organic farming, home-based bakery, transport, merchandising, manufacturing, utilities, services and multi-purpose cooperatives. The municipal local government unit have provided avenues for some of these cooperatives like putting up trading-posts and marketing sites to help out cooperatives.
Although the research is limited in a municipality, the study can bring impact to cooperatives. This paper aims to:
  1. Awaken consciousness of managers on the importance of implementing WCM;
  2. Contribute in the attainment of the Philippine government’ aspirations about cooperatives; and
  3. Determine the level of implementation of WCM among cooperatives that could influence not only those cooperatives involve in the study but also those cooperatives with similar situations regardless of their geographic areas.
To meet the aims of this paper, the study explores the implementation of WCM in terms of: (1) current asset management along cash, receivables and inventory; (2) current liabilities management along accounts payable, trade payable and short-term loans; and (3) net working capital management along investment policies and liquidity management.