Improved accounts payable management could boost businesses cash flow

February 28, 2011 Improved accounts payable management could boost businesses cash flow.

Although the economic downturn has placed considerable financial pressure on American businesses, many companies have the potential to boost their cash flow by carefully managing their accounts payable, adjusting inventory levels and getting customers to pay their bills on time, according to an REL study.

REL, a division of The Hackett Group, conducted a study of the 1,000 largest U.S. companies in terms of sales, and found that they could garner as much as $740 billion in excess cash flow with better supply chain management. When reviewing 2009 financial data, the authors of the study found that there was an excess $141 billion in working capital for accounts payable that could have been freed up with better accounting practices. Businesses can hire a third-party recovery audit firm to help them identify errors and lost revenue, including recovering costs from past mistakes.

REL determined that there was $740 billion in excess cash flow by calculating what would happen if all of the 1,000 companies had the working-capital performance of the top 25 percent. 

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Category: Accounts Payable Analysis

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