CFO TIP – PAYABLES MANAGEMENT
Cash flow management is crucial in all businesses. Todays tip – Accounts Payable
Payables follow three basic principles:
The best source of funds comes from your bank account and cash retention is key.
Establishing proper vendor payment timelines creates a certain predictability for your vendors and over time will help you build trust and great relationships.
Payment terms can be established in multiple ways. Depending on your strategic needs consider the following dates as your basis of calculating the payment dates:
- Product delivery date / job date
- Invoice date
- Invoice received date
- Cycle cutoff date
Push paying vendors off as far as is reasonable and appropriate to your relationship.
Holdback structures are common in the construction world, provide a risk mitigation strategy and cash planning opportunity.
Certain credit cards like American Express can be utilized in cash flow management. Allowing the extension of payment timelines up to another 60 days if planned properly.
Communication with your vendors, both initially and ongoing, is key to ensuring a good relationship is developed.
Vendor discounts should be utilized where possible as these are instant savings and help realize better overall margins within your business.
Leverage Consulting Group provides financial & strategic planning services along side accounting & administrative support.
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To develop business strategies for growth & sustainability,
Through leveraging resources and easing commitments.
Peter Teunissen, CPA (ca)
Founder & CEO
– Leverage Consulting Group –