2. The Optimal Payment Policy11
The Optimal Payment Policy
Updated Chapter Name, EGM

3. 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.

4. 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

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

6. Cost of Paying Sooner Than Necessary
Opportunity cost
Cash shortages

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

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

9. 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.

10. The Mechanics of Bill Paying
Paid-outs
Invoices on account
Credit card payments
Bill-paying service
Updated Section Heading, EGM

11. 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
Added Slide, EGM