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36
ACCOUNTING

Accounts Payable: Timing Strategies
 

An auditing expert offers a couple tips on using your accounts-payable system as a source of financing.
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"Your accounts-payable system can be a great source of interest-free financing," notes Bruce Silverman, director of auditing at M.R. Weiser & Co., LLP, a New York City-based accounting firm. His tips:

Negotiate for the best payment terms before payables exist. "If you wait for bills to arrive, you've lost your best negotiating opportunities." Instead, aim to achieve the best terms -- meaning the longest, without any hidden costs -- at order time.

Figure out the advantages of early-payment discounts. "These often work out to be more profitable than any other way you can invest corporate dollars."

Stretch accounts payable, but don't forget to protect your credit rating. "You've got to walk a fine line between paying bills as late as possible -- if early discounts don't exist -- and not doing anything to jeopardize your relationships with vendors." Two other caveats: always pay taxes when they're due, and make certain that you manage payments so that you stay within whatever financial covenants your bank insists on.

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Last updated: Mar 1, 1996




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