Wal-Mart maintains high accounts payable, boosts its working capital performance

Wal-Mart, the largest retailer in the world, has been able to attain its status with a successful working capital strategy.

In 2010, Wal-Mart posted $405 billion in revenue and increased its accounts payable by more than $1 billion for a total of $30.45 billion, while its accounts receivable decreased by $297 million for a much lower total of $4.14 billion.

Higher accounts payable enables Wal-Mart to hold a significantly larger portion of cash that it can invest in its own business or allow to accrue interest, Trefis, a group of Massachusetts Institute of Technology engineers and Wall Street analysts, reports. Applying a modest 3 percent annualized return on the $30 billion it has yet to pay its suppliers can lead to an addition $2 million in revenue per day.

Wal-Mart has established a large difference between payables and receivables thanks to its influence over suppliers and strong brand image, according to the source. In order to maintain this setup, it is important that suppliers eventually receive the appropriate payment. One way organizations with notable accounts payable totals can ensure they have kept accurate records is to hire an accounts payable recovery audit firm to review their financials and spot errors such as duplicate payments.  

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