1. 1 Chapter 11 The Optimal Payment Policy

2. 2 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

3. 3 Cost of Paying Sooner Than Necessary Opportunity cost Lost interest income Few foodservice firms employ excess cash investment methods

4. 4 Cost of Paying Too Late Reputation as a slow payer Jeopardize future credit potential Damage credit ratings Placed on COD by suppliers Incur interest charges Loose cash discounts Legal problems Suppliers will not do business with you

5. 5 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.

6. 6 The Mechanics of Bill Paying Paid-outs Invoices on account Credit card payments Bill-paying service

7. 7 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

8. 8 Copyright ©2008 John Wiley & Sons, Inc.