![]() The Interpretation of Financial Statements This is an important metric, since it represents an unnecessary outflow of cash that might not be recoverable from the payee. Any percentage greater than zero indicates that a company's payables system is not adequate for the timely identification of duplicate supplier invoices. The percentage of duplicate payments processed is calculated as the aggregate amount of duplicate invoices paid, divided by the total amount of supplier payments made. Percentage of Duplicate Payments Processed This metric is most important for those businesses with enough excess cash on hand to be able to take early payment discounts it is not of much use if you are in the opposite situation. Keep in mind that some discounts offered are not a good deal, and so should not be included in this calculation. Any measurement less than 100% indicates problems with the timely identification and payment of early payment discount deals. The percentage of qualifying discounts taken is calculated as the total dollar amount of qualifying supplier early payment discounts taken, divided by the total dollar amount that could have been taken. This is the payables metric that company controllers follow the most - and which might also be followed by more senior executives. A shorter turnover interval can indicate that suppliers are not willing to grant a company extended payment terms. A longer turnover interval than the industry average can indicate that a company is not paying its suppliers in a timely manner. ![]() ![]() Payables turnover is calculated as total supplier purchases, divided by average accounts payable. There are only a few ratios specifically targeted at accounts payable. The operational efficiency ratios are monitored internally as a management function, while the ability to pay is of more interest to outside analysts, who are judging the creditworthiness of a company. Accounts payable ratios are designed to measure the operational efficiency of a payables department, as well as its ability to pay suppliers in a timely manner. ![]()
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