On receipt of AP Invoices, we organize and record them in preparation for a payment cycle. Your virtual bookkeeper can then process payments to your vendors via 3rd Party Payment Platforms such as Bill.Com, making your cash flow and accounting easier to manage.
Our end-to-end solution includes the following:
- Build a Purchase Order System, if the accounting procedure calls for it
- Capture and enter data: We manage all your paper-based payables documents through scanning, sorting, indexing, review and verification of scanned invoices and the final stage of batch preparation
- Review and suspect Accounts Payable fraud and suspect duplicate analysis through bilateral way data matching by document indexing, audit and control mechanisms devised by us to eliminate the risk of duplicate payments.
Performance evaluation of your payable’s management
- Accounts payable are one of three main variables of working capital, along with accounts receivables and inventory. Understanding the relationship amongst these three variables can help you understand how these three accounts interact among each other and the resultant effects on working capital levels, cash flow, and the operating cycle. An appropriate balance must be struck, whereby the advantage of deferring cash outlays using trade credit is weighted against the risk of excessive short-term credit.
- We design a number of metrics and use short-term financial ratios to evaluate the performance of payables and manage the same, such as:
- Payables Turnover Ratio: Management can use this ratio to measure the average number of times a company pays its suppliers in a particular period.
- Days in Payables Outstanding: Measuring the average length of time it takes a company to pay for its short-term purchases in a period, this can be used by management to determine an optimal timing of payments for its payables.
- Cash Conversion Cycle: An important measure of the length of time required to turn inventory purchases into sales, and subsequently into cash receipts. Using the CCC, management can assess the interaction of payables with the 2 other working capital accounts: receivables and inventory, and the resulting effects on cash flow.
- Net Working Capital (NWC): NWC is the difference between current assets and current liabilities. High levels are desirable for short-term liquidity. A decreasing pattern or trend in NWC can be attributed to increasing levels of payables, and thus can serve as a warning sign of excessive short-term credit. A negative NWC (particularly when persistent) is a red flag for a lack of liquidity or potential insolvency.
- Current and Quick Ratio: Two other liquidity measures, the current ratio expresses the NWC equation above as a ratio between current assets and current liabilities. Holding all else equal, rising A/P levels will reduce both the current and quick ratio. These ratios can be used to assess the impact of increasing payables on short-term liquidity.