This lesson examines strategies for managing trade payables to optimise the working capital cycle. The ACT syllabus requires the ability to recommend appropriate tools to manage trade payables to optimise the working capital cycle .

2.1 Payables Management Fundamentals

Trade payables represent money owed to suppliers. Effective payables management can extend cash outflow, improving liquidity. The ACT syllabus covers segmenting suppliers (strategic, core, non-core) to apply different payment strategies, improving metrics through extended trade terms, seasonal dating, and payment methodology . Payables processing using Straight Through Processing (STP) and Enterprise-wide Resource Planning (ERP) systems is also emphasised, as is the effective management of information .

2.2 Optimising the Payables Process

Strategies to improve payables metrics include extending trade terms, using seasonal dating to align payments with business cycles, and optimising payment methodologies (including leveraging float and value dating). The ACT syllabus also covers the use of supply chain finance solutions such as reverse factoring (supplier finance), which allows suppliers to receive early payment at a lower cost .

2.3 Practical Considerations

The syllabus also addresses practical considerations in payables management, including the importance of relationships with suppliers and the balance between extending payment terms and maintaining supplier goodwill . Cultural differences and local terms and conditions in international operations are also relevant .