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Average Payments Period Concept
Average Payments Period is an activity
indicator that seeks to measure the efficiency level with which the
company is managing its suppliers payments. The bigger the average
payments term, bigger its payment terms negotiation capacity but can
also mean difficulties in the fulfillment of the agreed terms.
Average payments period is calculated by
the division of the debts to suppliers average amount by the purchases
of material and merchandise or services (added the taxes owed to
suppliers) at a certain period of time. The indicator can then be
converted in days, weeks or months, being enough for that to multiply
the result obtained by 365, 52 or 12, accordingly (considering naturally
that the considered period was one year).
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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