1 / 11

The Optimal Payment Policy

11. The Optimal Payment Policy. YOU SHOULD BE ABLE TO:. Describe and differentiate the tenets of cash management. Identify the major objective of a payment policy. Critique the costs of paying sooner than necessary and of paying too late.

jorjanna
Télécharger la présentation

The Optimal Payment Policy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 11 The Optimal Payment Policy

  2. YOU SHOULD BE ABLE TO: • Describe and differentiate the tenets of cash management. • Identify the major objective of a payment policy. • Critique the costs of paying sooner than necessary and of paying too late. • Compare and contract the bill-paying procedures that can be employed by hospitality operators.

  3. Tenants of Cash Management • Keep your money as long as possible • Pay your bills at the correct time • Collect monies due as fast as you can

  4. Objectives of Payment Policy • Keep money as long as possible • Pay bills at correct time • Collect money due as quickly as possible

  5. Cost of Paying Sooner Than Necessary • Opportunity cost • Cash shortages

  6. Cost of Paying Too Late • Reputation as a slow payer • Jeopardize future credit potential • Damage credit rating • Placed on COD by suppliers

  7. COST OF PAYING TOO LATE (CONT.) • Interest and penalties • Lose cash discounts • Legal problems • Poor credit risk • Lose good suppliers

  8. What is the Best Payment Policy? • The best policy is one that allows you to keep your money as long as possible, unless you have a favorable incentive to pay early.

  9. The Mechanics of Bill Paying • Paid-outs • Invoices on account • Credit card payments • Bill-paying service

  10. Another Word About Discounts • Become intent on discounts • May interfere with payment schedule • Might stay with discounting supplier longer than should • May need to borrow to take advantage of discount • Does discount alter payment due date

More Related