Management of Accounts Payable & Working Capital

Management of Accounts Payable & Working Capital

Module 5

Margarett Aguirre

Multiple Choice

What is the term that best fits this description? The measurement of the financial health of your business by determining how liquid it is.

• Credit Management

• Working Capital

• Liabilities

Working Capital

• Measures the efficiency of the bussiness on the basis of collecting its debt, paying and managing stock converted to cash.

• WORKING CAPITAL CYCLE = INVENTORY DAYS + RECEIVABLE DAYS – PAYABLE DAYS

  
  

How to Calculate and Improve

We must subtract current assets by liabilities to see our working capital

Our working capital determines our coverage and the overall health of the business.

It is our goal to gain and protect our working capital for our business.

Multiple Select

What is Creditor Days Ratio? Multiple answers!

• The creditor days ratio shows the average number of days your business takes to pay suppliers

• It is calculated by dividing creditors by the average daily purchases.

Useful tips of Creditor days

• Creditor days is a good indicator of the health of your business

• If you have low creditor days, it shows that you are paying the supplier too early

• High creditor days indicate that you are paying the supplier late

Multiple Select

Let's take a look at foreign suppliers. What are some risks associated with foreign suppliers? Multiple Answers!

• Language differences that affect both communication and documentation

• Time zone differences that affect shipping cost and delivery time

• There are no risks with foreign suppliers

• International regulations concerning payment methods

Foreign Suppliers

• Choosing the suppliers who are the most reliable in the foreign market can be one big key to success

• The advantages of using foreign suppliers are many, but the risk level is high

• Communication and research is critical in finding the perfect supplier

AP Automation and Dynamic discounting

AP automation is the contracts and research that are used to make sure the supplier is beneficial for the company.

Through dynamic discounting, clients can establish payment terms that work for the business

The Importance of Supply

• It is important to have a trusted supplier that is beneficial for your business

• Supply and Demand is critical for sucsess

• If the Supplier cannot meet the demand= loss of revenue for the bussiness

• Transparency and communication is needed for both parties

Multiple Choice

Credit is considered to be a very important factor in managing a business. What is a good description of credit?

• A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date.

• A free loan where the business can use the money to grow and become more successful.

• An agreement between two parties to share money together with no repayment.

• Free money?

Credit

Credit allows a business to grow and become successful

- More comfortable to rent an apartment and to get service from local utility companies

- More comfortable to buy what you want, when you want it.

-The ability to grow and unlock opportunities and pay later

Risks of Credit

There are also things to be mindful of when opening a credit.

-The freedom of money might lead you to overspend

-Missed payments= bad credit score

-Additional fees when not fully prepared for credit

-Bankruptcy

The Importance of Credit

Credit is a driving point on the opportunities for a business and even regular individuals

Without credit, we are not able to secure financial independence and cannot manage our choices

Having good credit, lowers interests rates and helps you secure loans and reach investment opportunities and is key to a much more easier life

Multiple Select

Please select each box that is critical to be aware of when establishing credit.

• Open a savings account or checking account and manage it well.

• Spending as much as you want anytime you want!

• Paying bills on time and keeping track of payments.

• Building your credit and determining whether you can obtain credit for large future purchases, such as a car, a home, or college education.

• Buying the new 2021 Toyota Tacoma

Tips to Open a Credit

Banks tend to look at these characteristics to determine if you are eligible for credit.

-CHARACTER

-CAPACITY

-CAPITAL

-COLLATERAL

-CONDITIONS

A driving factor is if you are responsible and can pay back the money!

Credit Score

• A credit score is the numerical rating that affects your ability to get a loan and your financial opportunities

• It affects your ability to get a home or car

• Interest rates and insurance premiums

• Will impact the majority of your financial decisions

Multiple Select

What are some examples of events that boost your credit score? Multiple Awnsers!

• Paying Bills on Time and keeping track of intrest rates

• Paying your bills late and missing payments

• Buying a new car that fits your budget and fullfing payments on time

• Avoiding unnecessary purchases and focusing on necessities

Things to avoid to lower your credit sco

-Paying bills late or not at all

-Have credit cards balances near your maximum spending limit

-Apply for new credit cards frequently, whether you need them or not

- Exceed your credit card spending limit

How to Improve Credit Score

•  Consistently pay your bills on time

• Keep credit cards balances that are 70% or less of your spending limit

• Have a high-income relative to how much you owe

• Only apply for and open new credit accounts when you need them