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Monitoring Accounts Payables

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  • Gentry, James A
  • De La Garza, Jesus M

Abstract

In creating shareholder value, one objective of management is to increase the speed of cash inflows and reduce the speed of cash outflows. To accomplish this task, management must understand the relationships that cause accounts receivable and accounts payable to change. The paper expands a receivable monitoring model by Gentry and De La Garza to incorporate the causes of changes in payables. Several examples are developed to show the operation of the model. The three primary contributions of the paper are (1) developing algorithms that measure the causes of changes in payables, plus an interpretation for each set of conditions; (2) showing that a present value approach to monitoring payables is superior to a recommended accounting approach based on variance analysis; (3) finally, presenting an approach for ranking the performance of payable and receivable strategies. Copyright 1990 by MIT Press.

Suggested Citation

  • Gentry, James A & De La Garza, Jesus M, 1990. "Monitoring Accounts Payables," The Financial Review, Eastern Finance Association, vol. 25(4), pages 559-576, November.
    • Handle: RePEc:bla:finrev:v:25:y:1990:i:4:p:559-76
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    Cited by:

    1. Georgios Kolias & Nikolaos Arnis & Kostas Karamanis, 2020. "The Simultaneous Determination of Cash Conversion Cycle Components," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 19(2), pages 311-332, June.
    2. Wilcox, William & Horvath, Philip A. & Griffis, Stanley E. & Autry, Chad W., 2011. "A Markov model of liquidity effects in reverse logistics processes: The effects of random volume and passage," International Journal of Production Economics, Elsevier, vol. 129(1), pages 86-101, January.

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