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Managing
Payables (Creditors)
Creditors are a vital part of
effective cash management and should be managed
carefully to enhance the cash position.
Purchasing
initiates cash outflows and an over-zealous purchasing
function can create liquidity problems. Consider the
following:
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Who authorizes purchasing in your
company - is it tightly managed or spread among
a number of (junior) people? |
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Are purchase quantities geared to
demand forecasts? |
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Do you use order quantities which
take account of stock-holding and purchasing
costs? |
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Do you know the cost to the
company of carrying stock ? |
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Do you have alternative sources
of supply ? If not, get quotes from major
suppliers and shop around for the best
discounts, credit terms, and reduce dependence
on a single supplier. |
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How many of your suppliers have a
returns policy ? |
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Are you in a position to pass on
cost increases quickly through price increases
to your customers ? |
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If a supplier of goods or
services lets you down can you charge back the
cost of the delay ? |
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Can you arrange (with confidence
!) to have delivery of supplies staggered or on
a just-in-time basis? |
There is an old adage in
business that if you can buy well then you can sell
well. Management of your creditors and suppliers is
just as important as the management of your debtors. It
is important to look after your creditors - slow payment
by you may create ill-feeling and can signal that your
company is inefficient (or in trouble!.
Remember, a good
supplier is someone who will work with you to enhance
the future viability and profitability of your company.
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