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CHAPTER 3: MANAGEMENT OF ACCOUNTS PAYABLE METHODS OF PAYING SUPPLIERS -…
CHAPTER 3: MANAGEMENT OF ACCOUNTS PAYABLE
METHODS OF PAYING SUPPLIERS
CASH PAYMENTS
wages
small payments of petty cash
DO NOT USE CASH TO PAY LARGE AMOUNT OF MONEY
Cash must be kept secure; easily stolen
Can get lost in the post
Difficult to keep control over cash
No evidence a cash payment has been made if a supplier issues a receipt (bad recording keeping)
DISCOUNTS
Early settlement discount must be deducted from the payment to be made
CHEQUE PAYMENT
Individual is responsible for the safekeeping of the cheque book
Lock and key
Safe
Locked drawer
Only CERTAIN individuals will be permitted to sign cheque on behalf of company
Bank mandate form
Bank mandate letter
BANK GIRO CREDITS
Received payments from customers
Make payments to suppliers
Taking cash or cheque to bank
Fill in a bank giro credit form
Handing together with the payment over the counter at the bank
BANKER'S DRAFT
Cannot be stopped or cancelled after being issued
ELECTRONIC FUNDS TRANSFER
Banking Automated Clearing Services (BACS)
Electronic transfer funds between accounts and bank
Operates with very reduced amounts of paperwork
Used to pay monthly salaries to employees
Clearing House Automated Payment System (CHAPS)
Computerised system that enable same-day clearing
Be used by corporate treasures with an office computer terminal
STANDING ORDER
Regular payments or fixed amount
Hire purchase payment
Rental payment
Insurance premiums
Paying business to set up for standing order arrangements
Regular payments from its account
Fixed amount of payment
Frequency of each payment and due date
Banking details of supplier
DIRECT DEBITS
Used for regular payments
Person who receives payment initiates each payment
Informs the bank the amount of each payment
Variable amount for each time
Payments by direct debit
Telephone bills
Gas bill
Utilities
Benefits of direct debit
Spend less on administration
Cash flow is improved
Company know its timing of receipt
If amount collected changes, change is made without delay