You have a process for managing creditors
Paying suppliers in accordance with the agreed terms and conditions is essential for providing the cash flow needed to run your company. This cash flows through the supply chain so that any late payments can cause problems for those companies dependent upon these funds to pay their bills
Key Issues
·         The cash your supplier receives in payment for the goods and services they provide is essential for their continued existence both in the short and long term
·         Companies must act responsibly, making it a policy to pay their suppliers on time and conform to the agreed terms and conditions
·         Cash is a vital commodity and all reasonable endeavours must be taken to retain adequate amounts in the business at all times,
·         Companies have numerous ways of preserving cash - lease agreements, consignment stocks, negotiated extended credit terms, credit cards
·         Your purchasing manager and their team are responsible for ensuring materials are available when required and controlling the levels of stock
·         The factory and purchasing managers must collaborate and take joint responsibility for delivering the master production schedule, on time
·         Businesses must decide how best they can support each other
o      Suppliers need to be given advance visibility of schedules
o      Deliveries should be made on time and in full
o      Quality problems should be rectified prior to delivery
o      All effort should be made to reduce lead times, driving out stock
o      Items should be delivered ready for use without inspection
·         Payment terms should be negotiated as a key aspect of the purchasing agreement and used tactically to lower your total acquisition costs
·         Deviations to agreed standard terms and conditions should be documented
·         Separate payment arrangements should be discussed with the supplier or external finance houses, if extended credit is required
·         Outstanding balances need to reviewed daily by the finance and purchasing managers, and any necessary payments made
·         The finance manager is responsible for monitoring outstanding bills and taking actions to ensure that the business has the cash required to pay them
·         Use forward exchange contracts to protect against currency movements
·         Use Credit Guarantee schemes to help secure export orders
Factors for Success      
Factors to  Avoid
1.     You conserve cash and build appropriate balances to cover outstanding bills
2.     Your managers control all expenditure within their agreed budgets
3.     Your managers review cash balances daily
1.     Paying bills early or before the contract has been satisfactorily fulfilled
2.     Allowing ICT systems to automatically pay invoices without verification
3.     Managers ignoring cash balances
Who does this apply to?
Finance manager, purchasing manager
Realisable Benefits
A controlled flow of cash out of the business and a sustained supply chain


Factors affecting financial performanceFactors affecting financial performance

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Cash flowCash flow

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Determining the cost of productionDetermining the cost of production

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Justifying the make versus buy decisionJustifying the make versus buy decision

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Justifying capital expenditure decisionsJustifying capital expenditure decisions

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Managing debtorsManaging debtors

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Managing creditorsManaging creditors

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Providing management informationProviding management information

Providing management information