Management of Payables
Account payables management refers to the managing its purchase trade credit by set of policies, practices and procedures engaged by a company. It consisting with acquiring favourable terms of purchase, timings of purchases, seeking for trade credit lines and Managing the flow so it as efficiently control the working capital of company’s.
Payables Turnover Ratio: This ratio measures the average number of times a company pays to its suppliers in particular period. The average index of industry than a Higher number, the company pays at faster rate to its suppliers than its competitors.
Their are few ways to manage payables efficiently:
- Take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay it in 15days.
- To make a payments with use of electronic funds transfer on the last day when it going to be due. While retaining use of your funds will remain current with suppliers as long as it possible.
- To know your financial situation then communicate with your suppliers. Build a good relation with them so that if you need to delay a payment, you will need their trust and understanding.
- Carefully consider vendors’ offers of discounts for earlier payments. These can amount to expensive loans to your suppliers, or they may provide you with a chance to reduce overall costs.
- When choosing suppliers, always don’t focus on the lowest price. More than a bargain – basement price sometimes more flexible payments terms can improve your cashflow of company.
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