The accounts payable turnover period shows. Accounts payable turnover ratio
Definition 1
Accounts payable is a type of organization's debt to other entities, which this entity is obliged to fully repay.
Accounts payable usually arises when the date of receipt of services (goods) does not coincide with the actual date of their payment.
The presence of accounts payable at the enterprise is not a favorable factor and reduces the quality indicators for assessing the financial condition of the enterprise.
To analyze the effectiveness of management at an enterprise with accounts payable, the following coefficients are most often used:
- turnover ratio,
- company's dependence on accounts payable;
- period of repayment of accounts payable,
- self-financing ratio;
- return on accounts payable and others.
When choosing which of the indicated indicators (coefficients) will be used to analyze the state of the organization's accounts payable, it must be remembered that a quality control system should not be overloaded with calculations. Therefore, it is justified to include in the analysis of accounts payable only those indicators that are most suitable for a particular organization that fit into its system of financial ratios.
Turnover ratio
Consider how the turnover ratio of accounts payable is determined when analyzing this type of organization's debt. The specified ratio shows how quickly the organization makes settlements with its counterparties. The formula used in calculating the value of the turnover ratio is:
The accounts payable turnover ratio can be calculated based on data on the cost of goods, services, works. It is recommended to study this indicator for several periods in dynamics, as well as comparing it with the turnover ratio for receivables.
Calculation of the repayment period
The payable period is sometimes also referred to as the turnover period. It gives the user of the analysis information on how many days, on average, the organization pays its debts. For calculation given period repayments apply the following formula:
Remark 1
Ideally, non-overdue accounts payable have a repayment period equal to or greater than the repayment period accounts receivable.
The ratio of the company's dependence on accounts payable
The ratio of the company's dependence on accounts payable reflects what proportion of the organization's assets is financed by its creditors. When analyzing this coefficient, it is important to take into account the specifics of the industry in which the organization operates, as well as the fact that the dependence was formed, whether it is short-term or long-term.
The ratio of the organization's dependence on accounts payable is calculated using the formula below:
Calculation of the organization's self-financing ratio
The self-financing ratio is sometimes also referred to as the organization's financial independence ratio. It reflects the proportion of the organization's debts that can be repaid from equity.
The self-financing ratio is calculated according to the following formula:
The standard for this coefficient is considered to be unity. This means that the organization has own funds equal to the amount borrowed.
Return on debt ratio
The profitability ratio of accounts payable reflects the level of efficiency in the use of borrowed funds in the activities of the organization.
The formula for calculating the profitability ratio is as follows.
The efficiency of the company is determined by a whole range of calculated indicators involved in the analysis of production activities. One of them is the turnover of accounts payable, which determines the speed of repayment by the organization of its obligations to firms and individuals that supplied goods or services. Let's consider the algorithm for calculating this indicator and find out what role it plays in the analytical work of the company and how it affects production activities.
Accounts payable turnover: what does the term mean
An experienced economist knows that without a correct calculation of the rate of repayment of a company's own debts, it is difficult to predict further positive development, therefore, much attention is paid to the analysis of accounts payable in any organization. This is not surprising, because in a stably operating enterprise, the interaction of all production structures includes a large block financial transactions, the result of which is the emergence of a debt to other counterparty enterprises.
The task of a competent manager is to set up production in such a way as to repay the debts that have arisen as quickly as possible. This stimulates the development of activities, at the same time increasing the business reputation of the company and attracting potential suppliers of services or goods for cooperation. Thus, it is simply necessary to calculate the turnover of accounts payable and compare the obtained indicators with previous reporting periods in order to maintain the efficiency and stability of any production, as well as to take timely measures in case of negative moments.
Who acts as a lender
Creditors can be:
- suppliers of goods, components and other property, as well as service companies that provide public Utilities and supply of heat, water and energy resources;
- state organizations represented by budgetary / extra-budgetary funds in terms of debts on taxes and fees;
- banks/credit organizations;
- company personnel - when calculating wages.
Indicator value
The turnover of accounts payable is determined by the speed at which the company covers the debts incurred to the suppliers of services/goods. The coefficient indicates how many times in the reporting period the company repaid the average amount of its own obligations.
The accounts payable turnover ratio is related to credit risks(when using borrowed funds), therefore indirectly assesses the solvency and liquidity of the company. Its growth in comparison with the indicators of the previous period means an increase in the speed of settlements on obligations, a decrease - a certain delay in the payment of debts to creditors, which will require a deeper analysis to clarify the situation.
Accounts payable turnover: calculation formula
The indicator is calculated as the ratio of the value of acquired assets to the average debt to creditors for the period under review. The formula is:
K kr.z = P / S kr.z, where
K kr.z - the turnover ratio of accounts payable in times,
P - purchases,
C kr.z - the average amount of debt to creditors, which is found as half of the amount of debt to creditors at the beginning and end of the analyzed period.
The meaning of "Purchases" in financial reporting is not contained, it is found by calculation using the formula:
P \u003d C p + Z n -Z k, where C p - cost of sales, Z n and Z k - the amount of stocks at the beginning and end of the period under review. Russian economists often use a more conditional version of the calculation, replacing the calculation of the volume of purchases with a revenue indicator.
How to calculate the coefficient in days
In addition to calculating the coefficient in times, it is necessary to establish the turnover of accounts payable in days:
K kr.z / day \u003d 360 / K kr.z, where 360 is the number of days in a year. For other time periods, use the number of days in them. The indicator can be used in the formula total days in a year, i.e. 365. 360 includes the number of effective days, since 30 is taken as the number of days in any month to simplify calculations.
The result of the calculations is the determination of the average number of days during which settlements with creditors are not carried out and bills are not paid.
What does the indicator say
Despite the fact that an increase in the ratio is an indicator of an increase in the efficiency of the company and liquidity, its sharp rise will indicate a decrease in the profitability of production, because according to the golden rule of an economist, an increase in liquidity reduces profitability.
The analysis of the turnover of accounts payable will be incomplete if it is carried out without assessing the dynamics of the turnover of receivables. The actual state of affairs in the company will be clarified by comparing these two indicators: a positive moment is the excess of the turnover ratio of accounts payable over the indicator for settlements with debtors.
This factor increases the profitability of the company, therefore, the organization has more financial resources in circulation to expand production or carry out other activities.
standard
There is no fixed standard value for this coefficient, since it is too dependent on the industry, scale and nature of the activity. Usually, its conditional value is developed separately for industries with a focus on the most successful companies. Therefore, in order to conduct a qualitative analysis of the coefficient of the dynamics of accounts payable, it is important to calculate its value for the industry as a whole, as well as for the leading companies in it. Subsequently, this information provides invaluable assistance to the analyst-economist and becomes a necessary guideline in conducting financial analysis.
Let us analyze in detail the group of financial ratios - "Business activity" (turnover) of the enterprise. Consider, which shows the rate of repayment of our own debts by our enterprise. The analysis of accounts payable is well done in conjunction with the assessment of receivables. I wrote about the latter in an article:.
Accounts payable turnover ratio. economic sense
The accounts payable turnover ratio shows how many times (number of turnovers) in the reporting period (usually a year, but maybe a month, quarter) the company repaid its debts to creditors. IN international standard In financial statements, the accounts payable turnover ratio is referred to as the Accounts payable turnover ratio.
The higher the value of this coefficient, the higher the speed of payment of debts to creditors by the enterprise.
The ratio is primarily related to credit risk(the risk of non-repayment of the loan taken) and therefore its assessment indirectly assesses the liquidity and solvency of the enterprise. As mentioned above, the higher the ratio, the faster the company can pay off its obligations and, as a result, its liquidity / solvency will be higher (note, solvency is long-term liquidity).
Who can be a company creditor?
The creditors to whom accounts payable arise include:
- Suppliers,
- Budget (state),
- enterprise personnel,
- Other enterprises.
Analysis of accounts payable turnover ratio
The higher the value of the coefficient, the better the company's liquidity. That is why this ratio is often used in the analysis by creditors. However, it is not beneficial for our company to have large values of this coefficient, as this reduces the profitability of the company. You probably remember Golden Rule» the greater the liquidity, the lower the profitability (profitability) of the enterprise.
The assessment and analysis of the turnover ratio of accounts payable must be carried out together with the assessment of the turnover ratio of receivables. If the accounts receivable ratio is less than the accounts payable ratio, then this is a positive factor, as this increases the profitability of the enterprise. We have more "free" money to carry out activities.
Who Uses the Accounts Payable Turnover Ratio?
Let's analyze who needs an estimate of this coefficient. This ratio is used to determine ways to increase the liquidity of the enterprise. It is required in reports for:
- CEO,
- financial director,
- financial manager,
- Legal service of the enterprise,
- Company creditors,
- Investors.
Accounts payable turnover ratio. Calculation formula
The formula for calculating the accounts payable turnover ratio consists of dividing Revenue from Goods Sold by the average value of accounts payable. The average value is determined by dividing the value of accounts payable at the beginning of the period, added to the value of accounts payable at the end of the period, by 2.
Accounts payable turnover ratio= Sales revenue/Average accounts payable
Calculation formula according to RAS (after 2011):
Accounts payable turnover ratio\u003d str. 2110 / (str. 1520np. + str. 1520kp.) * 0.5
In the formula e.g. and kp. - the beginning of the period and the end of the period. We can take any period. As a rule, a year is taken, but you can also take a month, quarter, six months.
According to the old form balance sheet coefficient will be calculated as follows:
Accounts payable turnover ratio\u003d p.020 / (p.620np. + p.620kp.) * 0.5
Do not forget that the value in the denominator of the formula is the average value, which is obtained by dividing the sum by the beginning and end of the period by 2.
Sometimes in the formula, instead of Revenue (p. 2110), there is Cost of Products Sold (p. 2120).
Accounts payable turnover ratio. Transformation into the "Turnover period" indicator
Along with the coefficient, the indicator is used payables turnover period. It reflects the number of days required for the conversion of accounts payable into money supply. The formula for the transformation of the turnover ratio of accounts payable in the period of turnover of accounts payable:
Accounts payable turnover period = 360 / Accounts payable turnover ratio
Sometimes 365 days are used instead of 360. economic sense This indicator is to determine the average number of days during which the company repays its debts to creditors.
Video lesson: "Calculation of key turnover ratios for OAO Gazprom"
Accounts payable turnover ratio. Calculation on the example of JSC "NLMK"
Calculation of the accounts payable turnover ratio for OAO NLMK. Enterprise balance
Calculation of the accounts payable turnover ratio for OAO NLMK. Income statement
Calculation of accounts payable turnover ratios for OAO Novolipetsk Iron and Steel Works:
Accounts payable turnover ratio 2014-1 = 61737720/(41868595+40178239)*0.5 = 1.5
Accounts payable turnover ratio 2014-2 = 125115823/(40178239+37164647)*0.5 = 3.2
Accounts payable turnover ratio 2014-3 =190638593/(37164647+48381408)*0.5 = 4.45
The turnover ratio of accounts payable at OAO Novolipetsk Iron and Steel Works increased over the year from 1.5 to 4.45. It can be concluded that the company has increased its liquidity, as the rate of debt repayment has increased by 3 times.
For comparison, let's calculate the change in the receivables turnover ratio for the same periods. In the balance sheet, receivables are displayed in line - 1230.
Accounts receivable turnover ratio 2014-1 = 61737720/(68707030+76837524)*0.5 = 0.84
Accounts receivable turnover ratio 2014-2 = 125115823/(76837524+83990873)*0.5 = 1.55
Accounts receivable turnover ratio 2014-3 = 190638593/(83990873+96796470)*0.5 = 2.1
As you can see, the receivables turnover ratio has a positive trend (▲).
If we compare the two ratios, we see that the Accounts Receivable Turnover Ratio is less (<), чем Коэффициент оборачиваемости кредиторской задолженности. Это положительный факт в сторону увеличения рентабельности (доходности) предприятия, который говорит, что у предприятия больше средней дебиторской задолженности, нежели средней кредиторской задолженности. А если помните, то дебиторская задолженность – свободные дополнительные деньги, которые можно пустить в производство.
Accounts payable turnover ratio. standard
There is no legally defined standard for the coefficient. Its meaning is different in each of the industries. Therefore, for a better analysis of the accounts payable turnover ratio, it is useful to calculate its average value for the industry, as well as for the leader in this ratio. So there will be guidelines for further financial analysis of the enterprise.
Summary
Let's sum up the study of the turnover ratio of accounts payable. It determines the effectiveness of our company's work with creditors. The coefficient is directly related to the liquidity and solvency of the enterprise: the higher the value, the higher the liquidity / solvency, respectively. It is useful to compare the value of the accounts payable turnover ratio with the accounts receivable ratio. If Kodz<Кокз, то наше предприятие работает эффективно. Нормативных значений, установленных законодательно, у коэффициента нет. Для анализа производится сравнение со средним значением коэффициента по отрасли и со значением у лидера отрасли. Читайте также статью>> « «, which talks about the 12 most important coefficients that must be calculated in the first place.
A significant share in the composition of the organization's sources of funds is occupied by loans, including accounts payable. The relative increase in accounts payable has a twofold effect. On the one hand, this phenomenon is favorable, since the enterprise has an additional source of financing. On the other hand, an excessive increase in accounts payable is extremely dangerous, since it increases the risk of possible bankruptcy.
At the first stage of the analysis of accounts payable, the change in the share of accounts payable in total amount sources of financing and in the amount of all liabilities based on the data of the balance sheet of JSC "PZTSM" for 2012-2013. (Appendix 1), as well as the statement of financial results of JSC "PZTSM" for 2012-2013. (Appendix 2).
Table 6. Composition and dynamics of accounts payable
Name of obligations |
Deviation, thousand rubles |
Growth rate, % |
|||
1.Suppliers and contractors | |||||
2.Advances received | |||||
6.Other creditors |
Conclusion: At the end of the reporting period, accounts payable amounted to 214,572 thousand rubles. Compared to last year, the level of accounts payable increased by 134,998 thousand rubles, due to an increase in accounts payable: to suppliers and contractors by 6,053 thousand rubles, advances received by 84,861 thousand rubles, to personnel by 39,886 thousand rubles ., according to calculations with off-budget funds by 9192 thousand rubles, according to settlements with the budget for taxes and fees by 9289 thousand rubles, as well as due to an increase in accounts payable to other creditors by 901 thousand rubles. All debt is current, there are no overdue accounts payable.
Based on the data in table 7, it is possible to determine the share of short-term accounts payable in the total value of the sources of financing of the enterprise.
Table 7.- Structure of accounts payable
Accounts payable, incl. | |||||
1.Suppliers and contractors | |||||
2.Advances received | |||||
3.According to wages before the staff | |||||
5.for settlements with the budget for taxes and fees | |||||
6.Other creditors |
The dynamics of changes in the structure of accounts payable is presented in Table. 8
Table 8. - Dynamics of changes in the structure of accounts payable
Accounts payable, including: |
Deviation, |
|||
1.Suppliers and contractors | ||||
2.Advances received | ||||
3.On wages before the staff | ||||
4. According to settlements with extra-budgetary funds | ||||
5.By settlements with the budget for taxes and fees | ||||
6.Other creditors |
Conclusion: Based on this table, we can say that the share of debt to suppliers and contractors decreased in 2013 by 1.67%, advances received also tend to decrease by 6.88% in 2013 compared to the previous period, debt to personnel on the contrary, it increased by 18.59%, debt on settlements with off-budget funds increased by 2.37%, but debt with the budget for taxes and fees decreased by 12.79% in 2013 compared to 2012, debt to other creditors had an upward trend of 0.35%.
At the second stage of the analysis of accounts payable, a characteristic of the turnover of accounts payable is given.
The level of solvency and financial stability of the organization depends on the turnover rate of accounts payable, which characterizes the efficiency of the organization. To determine the turnover of accounts payable, the number of turnovers and the average period of adjustment of accounts payable (turnover of accounts payable in days) for the reporting period are calculated, which are then compared with similar indicators for the previous reporting period.
There are several ways to determine the indicators of accounts payable turnover, which differ in the basis used for calculations. In particular, the number of turnovers can be calculated as the ratio of sales revenue or cost of sales to the average accounts payable (Table 9). The main purpose of the analysis should be to determine the speed and time of debt turnover and reserves for its acceleration by different stages business activities of the firm.
Table 9. - Calculation of indicators of accounts payable turnover
Name of indicator |
Deviations |
||
Revenue from product sales, thousand rubles | |||
cost of sales, Thousand rub. | |||
Average accounts payable, thousand rubles | |||
Based on sales revenue |
|||
Accounts payable turnover ratio | |||
Accounts payable turnover ratio based on cost of sales |
|||
Accounts payable turnover ratio | |||
Period of repayment of accounts payable in days | |||
Share of accounts payable in current liabilities |
Conclusion: The average accounts payable in 2012 amounted to 147,073 thousand rubles. r., this is 58625.5 thousand. R. more than the corresponding figure in 2011.
As can be seen from the calculations presented in Table 9, the ratio of sales revenue and average cost short-term liabilities of the organization indicates a negative trend at the end of 2012.
If in the previous 2012 for each ruble of short-term debts there were 14.13 sales revenues, then in the reporting year 2013 -11.45, therefore, in 2013 the turnover ratio of accounts payable based on proceeds from product sales decreased by 2.68 times.
The reduction in the turnover of accounts payable of the organization JSC "PZTSM" indicates a decrease in the speed of payment of the company's debts and an increase in the growth of purchases on credit.
The decrease in the organization's accounts payable turnover ratio in 2013 resulted in an increase in the period of repayment of accounts payable by 5.96 days and amounted to 31.44 days.
The number of turnovers of the organization's accounts payable, calculated on the basis of the cost of sales, is much less than that calculated on the basis of sales income by 5.2 and 2.05, respectively.
The dynamics of the accounts payable turnover indicator based on the cost of sales confirms the decrease in the turnover of short-term liabilities in 2013.
This trend indicates that the company is not able to timely regulate accounts payable and other short-term liabilities.
The ratio of accounts payable and receivable
One of the sources of borrowed funds of the organization is accounts payable, i.e. the amount of short-term obligations to suppliers, employees for wages, budget and other financial obligations. It arises, as a rule, as a result of the existing system of settlements between organizations, when the debt of one organization to another is repaid after a certain period, and in cases where the organization first reflects the occurrence of debt in its accounts, it repays it in time. Along with this, accounts payable is a consequence of untimely fulfillment by the organization of its obligations.
The volume, qualitative composition and movements of accounts payable characterize the state of payment discipline, which in turn indicates the degree of stability of the financial condition of the organization.
When analyzing accounts payable, it must be taken into account that it is both a source of coverage for receivables, and is itself often covered by returned receivables. Therefore, it is necessary to compare the amount of receivables and payables.
The main indicators by which accounts payable and receivable are compared are:
Growth rate, %;
turnover in revolutions;
Turnover in days.
Table 10. - Dynamics of receivables
Name of obligations |
At the beginning of the reporting period |
At the end of the reporting period |
Deviations |
Receivables | |||
Including: | |||
Buyers and customers | |||
Advances issued | |||
According to the budget | |||
For settlements with off-budget funds | |||
Claim settlements | |||
Conclusion: the level of accounts receivable decreased by 72,601 thousand rubles compared to the previous period, including due to the write-off of accounts receivable in the amount of 90.4 thousand rubles.
Table 11. - Indicators of turnover of receivables of JSC "PZTSM"
From the data in the table it can be seen that over the analyzed period, the state of settlements with debtors of the organization worsened.
Table 12. Factor analysis of receivables turnover
Name of obligations |
At the beginning of the reporting period |
At the end of the reporting period |
Deviations |
Receivables | |||
Including: | |||
Buyers and customers | |||
Advances issued | |||
According to the budget | |||
For settlements with off-budget funds | |||
Claim settlements | |||
Change in receivables, including due to: | |||
Buyers and customers | |||
Advances issued | |||
According to the budget | |||
For settlements with off-budget funds | |||
Claim settlements | |||
This analysis showed that the turnover of receivables increased by 4.3. The disadvantage is the increase in the share of receivables in the total volume of working capital by -12.25%, which indicates an increase in the diversion of funds from the company's turnover.
Initially, as in the case of accounts receivable, we reviewed the dynamics and structure of accounts payable earlier (Table 7 and Table 8).
In reviewing these tables, we found:
That the share of debt to suppliers and contractors decreased in 2013 by 1.67%, advances received also tend to decrease by 6.88% in 2013 compared to the previous period, debt to personnel, on the contrary, increased by 18.59%, debt in settlements with off-budget funds increased by 2.37%, but the debt to the budget for taxes and fees decreased by 12.79% in 2013 compared to 2012, the debt to other creditors tended to increase by 0.35%.
Let's carry out a factorial analysis of the turnover of short-term accounts payable, the analysis is carried out by the method of chain substitutions:
Table 13. - Factor analysis of accounts payable turnover
Indicators |
Base period |
Reporting period |
Changes |
||
Accounts payable | |||||
Suppliers and contractors | |||||
Advances received | |||||
For taxes and fees | |||||
Other creditors | |||||
Change in accounts payable, including due to: | |||||
Suppliers and contractors | |||||
Advances received | |||||
For staff salaries | |||||
For settlements with off-budget funds | |||||
For taxes and fees | |||||
Other creditors |
According to the analysis, it can be noted that the turnover ratio of accounts payable decreased by 7.8 thousand rubles.
The purpose of this analysis is to identify which of the debts to a greater extent affects the state of settlement and payment discipline for the enterprise.
One of the ways to determine the optimal ratio of accounts receivable and accounts payable is to calculate a coefficient that allows you to determine how much accounts receivable per ruble accounts payable, and the optimal value of this ratio varies from 0.9 to 1.0 i.e. accounts payable should not exceed the accounts receivable by more than ten percent.
The calculation of the coefficient is carried out according to the following formula:
KSDK=D3/K3=0.86
where KSDC is the ratio of accounts receivable and accounts payable, %;
Dz - accounts receivable;
Kz - accounts payable.
Based on the data obtained, it can be seen that the ratio of accounts payable to accounts receivable indicates an excess of accounts payable over accounts receivable by 0.86. In this case, a significant action will be considered the need to quarterly monitor the ratio of receivables and payables and make all effectively significant efforts to reduce it. It is necessary to gradually and carefully analyze and pay off creditors, systematically and on time to repay their debts, otherwise the company will lose the trust of its regular suppliers, which may affect the business reputation of banks and other creditors, receiving high penalties on settlements with counterparties, which significantly indicates the relevance of the chosen topic.
WAYS TO OPTIMIZE THE FORMATION OF THE ANALYSIS OF PAYABLES
Directions for improving calculations
Recently, in our country, little attention has been paid to the problem of managing receivables and payables, because the rules of the game that have developed in the Russian market made it possible to receive large profits by Western standards due to factors that have nothing to do with optimizing the limited resources involved in production. However, the days of making easy profits are over and therefore enterprises are forced to manage accounts receivable and accounts payable in such a way that, without disrupting the implementation of the production program, while minimizing all possible costs associated with purchase and storage.
Based on the results of the analysis of the composition, structure and dynamics of accounts payable in PZTSM OJSC, it can be concluded that, in general, the situation in the sphere of payment and settlement relations of the enterprise with its creditors does not pose a significant threat to the stability of the financial condition of the enterprise. Nevertheless, the dynamics of growth and accounts payable, indicates the need for close attention of management to the organization of payment and settlement relations.
To avoid problems during the audit, the company must have complete documentation confirming the correctness of the reflection of the balance of debt under the relevant balance sheet items, justifying the reasons for the formation of debt, the reality of its receipt (acts of reconciliation of settlements or letters of guarantee in which debtors recognize debt). It is very important to monitor the terms of the debt for each debtor and creditor separately and take timely measures to repay or collect the debt so as not to miss the deadline limitation period in case of need to collect debts in judicial order, as well as that the claim is not filed against the enterprise in question. Despite the fact that the situation at the enterprise under consideration is quite favorable in terms of the fact that the share of overdue receivables and payables is insignificant, nevertheless, the growth in the volume of both receivables and payables determines the need for increased attention to everything connected with it.
The increase in the share of accounts payable in short-term liabilities indicates a decrease in the sources of formation of current assets, as well as a decrease in the current liquidity of PZTSM OJSC. It is known that current liquidity is the ratio of all working capital (except for deferred expenses) to the amount of term liabilities (accounts payable plus short-term loans). A further increase in the share of accounts payable will reduce the current liquidity of PZTSM OJSC.
The main goal of managing the company's accounts payable is to ensure the timely accrual and payment of funds included in their composition.
From the standpoint of strategic development, the timely payment of funds accrued as part of current settlement obligations brings the enterprise more economic benefits than a deliberate delay in these payments.
The management of accounts payable of an enterprise is built on the following main stages (Fig. 1).
Rice. 1. Stages of accounts payable management at the enterprise
The main direction of improving the management of accounts payable at the enterprise, in my opinion, is the monitoring of settlements with counterparties.
The effective organization of the monitoring system makes it possible to solve the problems of mutual settlements in a pre-trial procedure.
To improve the state of settlements in PZTSM OJSC, the following is proposed:
It is necessary to monitor the ratio of receivables and payables: a significant predominance of receivables poses a threat to the financial stability of the enterprise and makes it necessary to attract additional (usually expensive) funds; the excess of accounts payable over accounts receivable can lead to the insolvency of the enterprise;
Control the diversification policy in relation to debtors, i.e. focus on increasing their number to reduce the risk of non-payment by one or more large buyers;
Constantly monitor the status of settlements on overdue debts;
Classify suppliers depending on the type of product, volume of purchases, solvency, history of credit relations and proposed payment terms;
Having up-to-date data on overdue debts, it is necessary to start claim work, i.e. send notifications - claims with all calculations of penalties for overdue debts.
To improve the organization of settlements with suppliers and buyers, the following measures are recommended:
Establish a commission to deal with accounts payable, whose responsibilities include systematic monitoring of the state of settlement discipline, regular reconciliations of settlements with suppliers. An important component of the operational work of the commission should be the maintenance of a file of reminders to debtors, and the timely presentation of claims for payment;
It is necessary to analyze the composition and structure of accounts payable for specific suppliers, as well as the timing of the formation of debts or the timing of their possible repayment, which will allow timely identification of overdue debts and take measures to collect them;
Constantly monitor the ratio of accounts receivable and accounts payable, since a significant predominance of accounts receivable poses a threat to the financial stability of the enterprise and makes it necessary to attract additional sources of financing, and the excess of accounts payable over accounts receivable can lead to the company's insolvency;
Control the turnover of accounts payable, as well as the state of settlements on overdue debts, since in conditions of inflation, any deferred payment leads to the fact that the company actually receives only a part of the cost of the supplied products, therefore it is desirable to expand the system of advance payments;
In this situation, it can be advised to organize at the enterprise a system of analytical accounting of accounts receivable not only in terms of timing, but also in terms of size, location of legal entities, individuals and proposed payment terms.
To create reserves of doubtful debts with other organizations and citizens for products, goods, works, services, attributing the amounts of reserves to the financial results of the organization.
By creating a reserve of doubtful debts, the organization will reduce its profit in advance (there is a deferral of income tax payment), which is very beneficial for the enterprise.
The amount of the allowance for doubtful debts is determined based on the results of the inventory of receivables carried out on the last day of the reporting period and is calculated as follows:
For doubtful debts with a maturity of more than 90 days - the total amount of the identified debt is included in the amount of the created reserve;
For doubtful debts with a maturity of 45 to 90 days - the amount of the reserve includes 50% of the amount of the identified debt;
For doubtful debts with a maturity of up to 45 days - does not increase the amount of the created reserve.
The amount of the created reserve should not exceed 10% of the revenue of the reporting period.
Thus, the above proposals will help to improve the organization of settlements and their accounting, analysis, reduce receivables and payables, and strengthen the financial condition of the enterprise.
Accounts payable is understood as the amount that the organization must pay for previously provided products, work or services performed. It also includes expenses on the wages of workers, contractors, arrears in mandatory payments and before budget organizations and off-budget funds.
The turnover ratio is applicable to both receivables and payables and shows the rate of repayment by the organization of its debt.
On the video - more about the concept of accounts payable:
The accounts payable turnover ratio, in turn, is an indicator that makes it possible to evaluate financial condition business entity, therefore, it belongs to the category of financial ratios that characterize the business activity of the enterprise and is used to assess cash flows enterprise and determine the effectiveness of its work. All calculations can be ordered on the website http://www.buhuslugi.com.ua/ or done independently using the formula below.
The formula for calculating the coefficient
The accounts payable turnover ratio is an indicator that gives an operational assessment of the financial condition. The formula for its calculation is as follows:
Cook \u003d Vyr / Kz, where
Vyr - proceeds from the sale of products, goods, services;
Kz - the amount of accounts payable of the enterprise.
To assess the financial condition of the enterprise at the end of the year, you can use the average annual cost of goods sold and the average annual value of accounts payable. In this case, the formula becomes:
Cook \u003d C-st cf / Kz cf, where
cp - average annual values of indicators.
A striking example of calculating the accounts payable turnover ratio is the use of the balance sheet data of the enterprise Web-Innovation-Plus OJSC, which are summarized in the general table 1.
Table 1 - Data accounting OJSC "Web-Innovation-plus" for 2015-2016, unit of measure: thousand rubles.
Liabilities | As of early 2015 | As of the end of 2015 | As of the end of 2016 |
II. SHORT-TERM OBLIGATIONS | |||
Accounts payable | 88 | 98 | 99 |
TOTAL FOR SECTION IV | 144 | 148 | 149 |
Balance | 281 | 288 | 241 |
financial results report | As of 31.12.2016 | As of 31.12.2015 | |
Cost of sales | 802 | 854 |
Thus, the accounts payable turnover ratio:
- For 2015: 802 / (98/2 + 88/2) = 8.62;
- For 2016: 854 / (99/2 + 98/2) = 8.65.
These calculations show that during 2016 the turnover of accounts payable was more stable.
What does the fluctuation of the coefficient indicate
The indicator of accounts payable turnover, depending on the situation at the enterprise, can:
- Increase, which indicates the dynamics of the decrease in accounts payable, which means the company is actively paying off with its suppliers;
- decline this indicator indicates problems with payment for settlements with correspondents of the enterprise and indicates that the enterprise uses borrowed funds as a source of financial resources.
What is the normative value
The accounts payable turnover ratio depends on the scale of the organization and the industry in which it operates. Therefore, if we talk about normative value the indicator of accounts payable turnover, it is necessary to evaluate this indicator on a par with accounts receivable.
The most favorable situation for any enterprise will be a low turnover ratio of accounts payable along with an increase in the same indicator for receivables.