Title

Improving Your Working Capital: Accounts Payable and Accounts Receivable Checklists

Section
Checklist
Summary

To ensure best practice in managing your working capital, it is key to optimize your end-to-end cash conversion cycle, not only through the right payment terms with suppliers and clients, but also through the improvement of the internal processes, tools and the organizational culture related to Receivables, Inventory and Payables.

10 items to check how well you are managing your Accounts Payable

  • Do you have standard payment terms aligned to a supplier segmentation?
  • Are end-of-month payment terms in use?
  • Are payment terms actively negotiated with suppliers?
  • Is the whole organization aware of the importance and impact of working capital?
  • Is the accounts payable (AP) performance monitored and reported regularly?
  • Are there incentives linked to AP performance targets?
  • Are the system payment terms in line with the suppliers contracts?
  • Is my payment clock optimized?
  • Have we minimized the number of payment runs?
  • Is the amount of spend paid early below 5%?

13 items to check how well you are managing your Accounts Receivable

  • Do you have robust contract terms and conditions covering the customer-to-cash process?
  • Do you have a sound review process to vet/approve non-standard conditions?
  • Do you have a clear credit risk management process implemented?
  • Are underlying credit limits checked on a regular basis?
  • Is there a review process for orders placed when credit limits are exceeded?
  • Do you monitor and minimize the number / value of unbilled receivables?
  • Are more than 95% of the invoices being issued automatically?
  • Do you use advance payment (if your business consents to it)?
  • Do you have a customer contact plan based on customer segmentation?
  • Are proactive (before due date) collection activities being conducted?
  • Are sales representative’s bonuses related to AR performance?
  • Can you clearly determine (and quantify) which open invoices are disputed?
  • Are disputes categorized with clear resolution responsibilities and timeline?
Download the pdf