Professional Documents
Culture Documents
Laboratory Group Assignment Online Presentation 01
Laboratory Group Assignment Online Presentation 01
ASSIGNMENT ONLINE
PRESENTATION 01
CASH MANAGEMENT
Journals
Others Cash Transactions Bank
Statements
Ledger
PAYMENT PROCEDURE
Selection of Invoices Documents
Purchase
Invoice BANK
File to Bank
Payment
Advice
Process Bank
Payments Statements
Open Entries
Vendor Selection
Accounts
received, lock in payment terms in advance and track
invoices against existing POs to ensure suppliers bill
in accordance with agreed-upon term.
Payable b. Maximize savings potential by exploring the viability of
any available early payment discounts, volume
rebates or trade spend initiatives.
c. Track payables outstanding by vendor and by payment
terms.
d. Set clear accounts payable metrics and adhere to
them across the organization.
e. When purchasing a new or riskier product, negotiate
longer payment terms to increase working capital or
ask to add the product to consignment stock rather
than inventory as a way to maximize liquidity and
reduce risk.
Policies –
5. Invoicing
a. Centralized processing to ensure a standardized and
consistent approach.
Accounts b. Refuse to pay inaccurate invoices (e.g. errors in
quantities, amounts, address, etc.). These should be sent
Payable c.
back to the supplier.
Process invoices on a timely basis and include a date
stamp.
d. Avoid paying invoices early; without risking key supplier
relationships, pay invoices only when they are due.
e. Conduct a management review of the AP aging listing to
determine appropriate follow-up actions
f. Develop appropriate channels and processes for
exception reporting and handling.
g. Implement an EDI system that allows vendors to submit
invoices electronically while enabling to track invoices
against their associated POs, validate and approve
payments and maintain accurate payment records
Policies –
6. Accounting and Reporting
a. Validate supplier invoices against contract terms and
their associated POs to ensure billing accuracy.
Accounts b. Improve real-time reporting capabilities by automating
reconciliations and ensuring they remain current.
Payable c. Follow up on and resolve unreconciled items on a timely
basis.
d. Have the same individuals prepare and review all
reconciliations to reduce the likelihood of overpayment or
duplicate payments.
e. Post journal entries before reporting period cut-off dates.
f. Apply payments to each invoice on the date they’re made
to maintain system accuracy.
g. Properly track all payments made, not just vendor
payments.
h. Select a method of payment that minimizes bank
charges.
RECEIVABLE COLLECTION PROCESS
Did the Apply Early
Customer custom Yes
Send Invoice Payment
Make Create Invoice er pay
Electronically on Discount if
Purchase
time? Applicable
No
Send Finance
Make collection No Did the Assess finance
Receive and
custom Charge Invoice charge if
calls and visits er pay? applicable Apply Payment
Electronically
Yes
Print AR
Record Deposit
Reports
Accounts Receivable Policies
3. Invoicing/Billing
a. Automate Invoicing/Billing. Deliver invoices electronically.
b. Ensure billing is completed in a timely basis and reports are relevant to the end-user.
c. Implement electronic billing systems.
d. Exception reports
e. Customer portal
4. Cash Application
a. Allocate payments to specific invoices rather than simply crediting the customer account.
b. Apply payments to the appropriate invoices, not just the oldest invoices
c. Apply payments to each account on the day they’re received, to maintain system accuracy.
d. Post journal entries well before system cut-off dates.
e. Reconcile accounts on a timely basis by quickly and consistently following up on unidentified cash
receipts.
Accounts Receivable Policies
5. Collection
a. Engage in frequent and consistent collection efforts.
b. Negotiate payment plans that align to corporate collection policies
c. Ensure any discounts offered benefit the company and are implemented
accurately.
d. Strengthen processes to permit accurate reporting.
e. Automate processes to avoid manual entry errors.
f. Implement lockbox system.
Other Policies
Make projections frequently. Closely monitor key cash flow data or variables, to be able
to make better, more accurate, more up-to-date projections of future cash flow.
CAPITAL STRUCTURE
CAPITAL
Amount in millions
STRUCTURE
After carefully analyzing the
different approaches in Capital
Structures I arrived in this
PARTICULARS AMOUNT Optimal Capital Structure for the
company using the traditional
DEBT 115,680 Approach.
EQUITY 134,047
115,680
134,047 46%
54%
DEBT EQUITY
ko = an overall capitalization rate for the firm
O 50,674
ko =
V 249,727
O 20.29%
ko =
V
ki = the yield on the company’s debt
E 48,351
ke =
S 134,047
E 36.07%
ke =
S
CAPITAL STRUCTURE
Traditional approach was chosen due to the following considerations:
1. The cost of capital is dependent on the capital structure of the firm.
2. Increasing financial leverage and the associated increase in ke and ki more than
offsets the benefits of lower cost debt financing.
3. It is combination of NI and NOI and states that initial use of debt reduces overall
cost of capital up to some level.
4. It maximizes to total value of the firm.