Account Payables Research Articles

Invoice level forecasting with discrete survival methods for effective forecasting of account receivables in supply chain

The objective of this study is to obtain accurate and timely Account Receivables forecasts that can feed into the Cash Flow Forecasting (CFF) for a generic wholesales scenario in a supply chain company. The main components of the CFF are the Account Receivables (AR), Account Payables (AP) and Working Capital (WC). The focus of this work is on AR, in particular on how they contribute to the overall cash flow forecasting. The prediction of AR is based on the predicted payment date of each invoice, which can be obtained from the time to payment given the issue date. In this context, we propose the use of discrete survival methods for predicting the time to payment of issued invoices. To obtain more accurate predictions for time to payment, we fit a generalized linear mixed effects model with a time-varying baseline hazard function. This approach provides greater precision for subsequent account receivables predictions compared to the prediction based on simply the payment terms of each invoice, standard time series and classification models, and continuous-time survival methods. We demonstrate the approach on two financial data sets.

Accounts Payable, Intellectual Capital, and Corporate Value: Case Study of Food and Beverage Sector on IDX 2016-2020

This quantitative study investigates the influence of account payable policy and intellectual capital on the value of companies within the food and beverages sub-sector listed on the Indonesia Stock Exchange. Purposive sampling was employed to select a sample of eight manufacturing companies for the period 2016-2020. Data were collected using documentation techniques and analyzed using SPSS. Results indicate that while the account payable policy significantly affects firm value, intellectual capital does not exhibit a significant impact. These findings shed light on the strategic importance of managing account payables for enhancing firm value in the food and beverages industry. Highlights : The study investigates the influence of account payable policy and intellectual capital on firm value in the food and beverages sector. Purposive sampling was used to select a sample of eight manufacturing companies listed on the Indonesia Stock Exchange. Findings reveal that while account payable policy significantly affects firm value, intellectual capital does not demonstrate a significant impact. Keywords: Account Payable Policy, Intellectual Capital, Firm Value, Food and Beverages, Indonesia Stock Exchange

Monitoring attention of institutional investors and trade credit financing

This paper examines the effect of the monitoring attention of institutional investors on firms’ trade credit financing. We document that trade credit financing is positively affected by the monitoring attention of the firm's institutional owners. Notably, only institutional investors with the highest monitoring attention can positively affect the firm's account payables, which is consistent with the intervention channel. Meanwhile, institutional investors with low monitoring attention negatively affect trade credit financing, which is consistent with the exit channel of institutional investors. Our findings support the view that the efficacy of institutional monitoring mainly depends on the ownership held by motivated monitoring institutions.

Audit fees and related party transactions: Evidence from Indonesia

This study empirically examines the impact of related party transactions on audit fees, focusing on distinguishing between tunneling-type and propping-type related party transactions. We investigate this causal relationship by analyzing the influence of various related party transactions on audit fees at the account level, allowing us to pinpoint the specific transactions that exert a more substantial influence on audit costs. Our research sample comprises 127 Indonesian manufacturing firms listed on the Indonesian Stock Exchange during the years 2020-2021, resulting in a dataset of 254 observations. Audit fees are quantified using the natural logarithm of the disclosed annual audit fees. We assess tunneling-type related party transactions by examining the proportion of assets and expenses involved in these transactions, breaking them down into categories such as account receivables, other receivables, and other assets. Similarly, propping-type related party transactions are evaluated based on the proportion of liability-based and sales-based transactions, further disaggregated into account payables, other payables, and other liabilities. Our hypothesis testing relies on a Panel Data Regression analysis model. Our findings reveal that tunneling and propping-type related party transactions significantly increase audit fees. Notably, we demonstrate that tunneling-related party transactions exert a more substantial impact on audit fees than propping-related party transactions, highlighting the significance of agency theory in understanding the risks associated with related party transactions.

THE EVALUATION OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED CONSUMER GOODS FIRMS IN NIGERIA (2003-2020)

This research analyses the influence of working capital management on the financial performance of publicly traded consumer goods firms in Nigeria. Also, to determine if the working capital variables such as cash conversion cycle CAC, account receivables period ARP, account payables period APP, and inventory turnover period ITP have a substantial impact on the financial performance of publicly traded consumer goods firms in Nigeria. Through the exchange rate channel, the Nigerian economy's underperformance spilled over to the non-oil sector, which fell by 0.2 percent y/y, the lowest performance since 1985. The novelty of this research examined the performance of the listed consumer goods industry during the covid-19 and the 2015-2017 recession periods, because cash flow was constrained throughout these periods. The study used macroeconomic variables such as inflation and interest rates as control variables to achieve the objectives; this study employs a longitudinal research design. Resources-based and contingency theories were adopted. The study examined a period of 2003-2020; the hypotheses were tested using panel data regression. The null hypothesis is rejected; an increase in APP leads to a decrease in the firms' performance, and an increase in CAC leads to an increase in the firms' performance. Also, an increase in the IFR and ITR reduces the firms' performances. The CAC and ARP of consumer goods firms had no significant effect on their performance during the COVID-19 pandemic and recession period, demonstrating the necessity to be prepared for unexpected and unforeseen conditions. Keywords: Account Payable Period, Account Receivable Period, Cash Conversion Cycle, Inventory Turnover Period, Consumer Goods, Working Capital DOI： https://doi.org/10.35741/issn.0258-2724.58.3.22

Trade credit and global value chain: Evidence from cross-country firm-level data

This paper investigates the effect of joining the global value chain (GVC) on trade credit by using the World Bank Enterprise Survey (WBES) for 55 countries from 2003 to 2019. GVC participation reflects status when a firm is a two-way trader and owns a quality certificate. When exporting, a firm may extend trade credit to its customer (account receivable). When importing, a firm may receive trade credit from its suppliers (account payables). Taking into consideration endogeneity due to reverse causality, our empirical results show the positive effects of GVC participation on the use of trade credit. When a firm participates in GVC, it is more likely to receive trade credit from its suppliers, extend trade credit to its customers, and simultaneously be involved in both types of trade credit. These effects become pronounced for financially-constrained firms, especially for small and medium-sized firms. Our findings suggest that one of the firms’ incentives to participate in the global supply chain is to overcome liquidity shortages.

The Influence of Debt Financing on Firms’ Performance: Empirical Evidence from Malaysia

This study investigated the relationship between the listed firms’ debt level and performance in Bursa Malaysia during a five-year period. Based on the results of the Hausman test and Breusch-Pagan LM test, the fixed-effect model is the most appropriate model that used to analyze the panel data of 50 Malaysian listed companies within the property sector from the year 2015 to 2019. The results indicated that the short-term debt (STD) and long-term debt (LTD) have positive and insignificant effects on return on asset (ROA), which means that the increase in the short-term debt and long-term debt will lead to an increase in the return on assets. Besides that, account payables (AP) has a negative and insignificant effect on the profitability of property sector companies. According to the outcome of the Granger Causality test, the return on assets does not affect by the account payables, short-term debt, long-term debt and firm size. There is only one unidirectional causality relationship that proves that short-term debt is affected by long-term debt. Additionally, this study focuses on enhancing the existing empirical knowledge of debt financing's influence on the profitability of the listed firms in the property sector.

Economic policy uncertainty and financing structure: A new panel data evidence from selected Asian economies

Economic policy uncertainty (EPU) refers to uncertain economic events that can hamper the transparent flow of different economic activities. Given that, this study tends to explore the association between EPU and corporate financing structure, including primary and secondary sources of financing. For regression analysis, we analyze the 55,200 firm-level observations from six economies of Asia spanning 2007–2016 and employ the 2-step system GMM (generalized method of moments). The statistical results imply that EPU has a negative impact on debt financing while it has a positive relationship with equity financing. Referring to secondary sources of financing, EPU negatively impinges upon account payables whilst positively related with financing through account receivables. Such spatial effects are robust across alternative measurements of EPU and control of endogeneity. The adverse impact of EPU can be explained by credit risk for banks and limited trade credit opportunities that shift financing preferences towards equity and account receivables. This study concludes that the industrial sector faces dynamic financing trends with exposure to policy uncertainty. It recommends direct policy guidance to policy officials that they should focus on enhancing policy stability because policy volatility can deter some financing options that may become useful in certain situations. This study is innovative by exploring the role of EPU in determining both primary and secondary structures of financing.

The Effect of Propping on the Performance of the Financial Industry in Indonesia

This study aims to determine the effect of related party transactions propping on the financial industry's financial performance and performance market performance. This research sample is 66 financial industry companies listed on the Stock Exchange Indonesia (IDX) during 2017-2019 with 198 observations as panel data. Based on the panel data regression test, this research found propping proxied by related party transactions account payables, related party transactions with other payables and related party transactions liabilities other than account payables do not positively affect the company's financial performance (ROA). Propping is proxied by related party transactions, account payables, and liabilities other than account payables do not positively affect the market performance of industrial companies' finance. Meanwhile, propping proxied by transactions of other debt-related parties positively affects financial industry companies' market performance (Tobin's Q). The findings align with transaction cost theory and the efficient transaction hypothesis that related party transactions are efficient transactions to boost company performance.

THE EFFECT OF PROPPING ON THE PERFORMANCE OF MANUFACTURING COMPANIES IN INDONESIA

This study aims to find empirical evidence of the impact of propping- related party transactions on company performance. The research sample was manufacturing companies listed on the IDX during 2017-2019 which were determined by purposive sampling and using the Generalized Least Square panel data regression analysis technique (cross-section weights). The results showed that propping (related party transactions related to account payables) had a positive effect on financial performance and had a negative effect on the company's market performance. Propping (related party transactions related to other payables) had a positive effect on the company's financial performance but doesn’t an affect on the company's market performance. Meanwhile, propping (related party transactions related to liabilities other than account payables) had a negative effect on financial performance but had a positive effect on the company's market performance.

Supply chain performance, profitability and Liquidity: An analytical study of Indian pharmaceutical sector

The study aims to find out the relationship between Supply Chain Performance (SCP), profitability, and liquidity of selected leading Indian pharmaceutical companies. The study is based upon the secondary data available on the website of the concerned Indian pharmaceutical companies. The SCP defines the operational velocity and is measured by the manufacturing efficiency (inventory days), ability of recovery from the debtors (accounts receivables days), and payment to creditors (account payables days). Profitability is the relative measurement of the earning capacity of the business organization and facilitates the comparison among the business organization of similar industries. The liquidity in a business organization refers to the state of pay ability of the short term liabilities in ordinary business activities. Profitability and liquidity are the bi-polar concepts in the business organization. There is an optimum balance between liquidity and profitability is expected for the growth and development of the business organization. Ratio analysis is to be used to analyze the SCP, profitability, and liquidity while Karl Pearson’s correlation and Spearman’s rank correlation applied to get the correlation between SCP, profitability, and liquidity of the companies, and relative relationship between a correlation of profitability and profitability to liquidity ratio of all selected companies. It is observed that there is moderate relationship gross profitability, profitability on the owner’s fund, and liquidity. But there is a negligible relationship between liquidity and return on total resources or profitability on total assets. The Indian pharmaceutical companies with higher profitability are much sensitive about the co-movement of profitability and liquidity. The SCP of the Indian pharmaceutical companies negatively and positively but negligibly affects the profitability and liquidity of the Indian pharmaceutical companies.

Impact of Working Capital Management on Firm’s Profitability: A Study on Listed Companies in Sri Lanka

Aims: The main aim of the study is to identify whether working capital management has an impact on firm’s profitability of listed companies in Sri Lanka.
 Place and Duration of Study: Pooled panel data of 95 listed companies from 18 sectors are listed on the Colombo Stock Exchange (CSE) which comprised of 475 observations is used during the period of 2012/2013 to 2016/2017.
 Methodology: Descriptive statistics, Pearson’s Correlation analysis, ANOVA, and Pooled Regression analysis were employed as measures of analysis. Working capital management components and working capital policies are used as independent variables which comprised of number of days of account receivable (DAR), number of days of inventories (DI), number of days of account payables (DAP), cash conversion cycle (CCC), working capital investment policies (WCIP), and working capital financing policies (WCFP). Current ratio (CR), firm size (SIZE), sales growth (GROWTH), and Debt ratio (DR) were employed as controlled variables. Gross operating profit (GOP) and Return on assets (ROA) were used as dependent variable.
 Results: In the descriptive statistics, average of DAR, DI, DAP, and CCC are 64, 63, 97, and 29 days respectively. The average WCIP and WCFP are indicated as 40% and 27% of total assets. For control variables, the average CR, SIZE, GROWTH, and DR are indicated as 2.27, 14.50, 33% and 40%. In the Pearson correlation analysis, CCC has negative relationship with GOP and ROA. With regard to WCIP and WCFP, there are negative significant relationships with GOP and ROA. Regression analysis states that working capital management significantly impacts on firm’s profitability of listed companies in Sri Lanka.
 Conclusion: These findings would be useful to consider on maintaining optimal working capital management components and policies to avoid corporate collapse and to maximize firm’s profitability.

Combination of Ant Colony Optimization and K-nearest Neighbours: The Influence of Working Capital Management on Corporate Performance

Purpose: This study looked at the influence of working capital management on firm performance using both accounting measure (ROE) and market measure (Tobin’s q) of firms listed in Nigeria and Ghana. Design/methodology/approach: The study used ant colony optimization (ACO) and k-nearest neighbours (KNN) in establishing the long-term effect of working capital management on corporate performance. Data were extracted from annual financial reports of non-financial companies listed on the Nigeria and Ghana stock exchanges for the recession period 2012–2016, with a total observation of 510. Findings: ACO was applied to determine the working capital management variables that influence corporate performance, and KNN predicted its longitudinal influence, which, in our view, has not been deeply researched. It was discovered that non-financial firms in the period of economic crises manage the account receivables and payables, as well as cash conversion cycles, maintaining optimum working capital for efficient operational activities. It is therefore assumed that these firms are exposed to external and other sources of finance, which enables them to increase investment in working capital, preventing the risk of low production hindering firms from settling debt, as well as customers, leading to the collapse of many firms in this region and accounting for an increase in the unemployment rate. Research limitations/implications: This study will inform corporate management and policymakers on the effect of economic crises on the performance of firms in the management of working capital to achieve desirable accounting and market performance. The ability of a firm to manage working capital during boom and recession periods enhances maximization of shareholders’ wealth. Originality/value: This study will alert policymakers to the urgency in setting up appropriate policies to address pertinent issues regarding longitudinal influence of economic crises on firm continuity and value. JEL Code: M4

The Effect of Financial Restructuring on the Overall Financial Performance of the Commercial Banks in Vietnam

The study investigates and measures the impact of financial restructuring on overall financial performance of commercial banks in Vietnam. Survey data for this research were collected from audited financial reports of 28 commercial banks in Vietnam, for the period from 2008 to 2018. In the study, we have built a model of econometric regression with the dependent variable being financial results measured through ROA and ROE. The research methods used include Pooled Ordinary Least Square Model (POLS), Fixed Effects Model (FEM), Random Effects Model (REM), and different Generalized Method of Moments (GMM). The results showed that the account payables restructuring and owners’ equity restructuring are much needed. Increasing the owners’ equity, decreasing the account payables would improve the overall financial performance, bad debts restructuring to decrease bad debts would also improve the financial performance as well. However, the financial restructuring in the period 2012-2015 and 2016-2018, indeed worsen the financial performance during those times. The findings of this study suggest that the evaluation of the financial performance after restructuring of commercial banks in Vietnam must be based on longer data. At the same time, it is necessary to examine differences between various banking groups to draw accurate conclusions on financial performance.

Usage and Impact of Artificial Intelligence on Accounting: 213 Evidence from Malaysian Organisations

Purpose: With the embedment of Artificial Intelligence (AI) technology into the accounting software, accounting function entered another phase of evolution in terms of the working method. By integrating the AI-based accounting software into the operational tasks, the functions of account payables and account receivables become easy and efficient. Despite the tremendous advantages of AI, the adoption of AI in Malaysia is still low relatively compare to other countries. Furthermore, there are limited academic research performed to study the impact of AI adoption on the organisations especially from the accounting perspective. Therefore, this study aims to investigate the use and impact of AI-based accounting software in organizations. Methodology: Face-to face in-depth semi structure interviews were conducted among nine organizations that are using AI based accounting software. The representatives who participated in the interviews were from the accounting service division of the respective organisation. Constant comparative method was used to analyse the data collected. Finding: The study found the usage of the AI-based accounting software has proved to have significant impact on the organisations in terms of increased productivity, improved efficiency, improved customer service, flexible working style, process governance and manpower saving. Originality: AI has emerged as a disruption technology in the era of Industry 4.0. This research has studied on the implication of AI adoption in the accounting function. From the result of this study, it has evidenced that adoption of AI-based accounting software in account payable function has yielded positive impact to the organisations. The finding will to spur the confidence of the organisations in Malaysia to invest in the AI technology.

Imperatives of Effective Working Capital Management and Profitability in the Banking Industry in Nigeria

This study explored the imperatives of effective Working Capital Management (WCM) and Profitability in the banking industry in Nigeria. WCM core variables namely: Short-term Investments; Credits to customers and Account Receivables and Payables were used as proxy. Survey design was adopted and data were collected using questionnaires and analyzed with Pearson Product-Moment Correlation Coefficient (PPMCC) denoted by ‘r’. The findings to an extent counter apriori expectation. Though the values of ‘r’ exhibited positive signs affirming positive relationship, the strength of relationship is on the average. This was affirmed by the values of (r2), especially that of the variable ‘Credits to customers’ which stood low at 0.2229, meaning that the variable explained only 22.29% variation in Profitability. By implications, the results suggest that WCM variables have not yielded sufficient cash flows that could optimize profits. We therefore recommend efficient surveillance of WCM variables in order to reduce instances that lead to funds losses.

A Behavioral Finance Approach to Working Capital Management in Context of Pakistani Firms

Behavioral finance incorporates cognitive psychology into conventional finance, suggesting that people are prone to various heuristic driven biases in the decision-making process. Nevertheless, the literature on behavioral finance and working capital is rather thin, as studies of working capital tend to focus on either its determinants or its relation with profitability. We aim to bridge this substantial gap by exploring the influence of different behavioral biases including self-serving biases, level of confidence and loss aversion bias and representativeness bias altogether with different components of working capital management individually, which include cash management, inventory management, account receivables management, account payables (debt) management and risk management. The data collection from 97 finance professionals through a self-structured questionnaire comprising 32 questions on a Likert scale. The data analysis is through Smart PLS. The result indicated that behavioral biases exert a direct influence on all Working capital parameters but a weak relationship for account payables in the context of Pakistan’s services and manufacturing companies.

Effect of Credit Rating on Trade Credit: Empirical Evidences from Pakistani Non-financial sector

The study investigated how non-financial businesses use trade credit in the context of borrowing restrictions in developing economies. Despite the tremendous changes in the trend, trade credits still have huge usage. Buyers and suppliers have moved from traditional trading systems to advancing automated and sophisticated business methods. Multi-dimensional aspects of business strategy also include trade credits. Trade credit has a huge change in supply and demand. Trade credit is used as the main source of financing in almost all regions of the world. World-renowned companies have access to financial lending, but they prefer trade credit because it provides them an edge against collateral held at financial institutions. This research includes some factors like trade credit and credit rating. In this study has unbalanced panel data from non-financial sector of Pakistan. The data range consists of 2008 to 2016 for 38 non-financial firms. Here, by using the fixed effect model examined how credit rating affects the trade credit supply and demand in case of large and small firms. The results show that account receivables and payables both increase in the case of large firm credit rating. They can easily use the trade credit process. In case of small firms, they also join this process or trade credit agreement for smoothing their business function, but they feel some difficulties from both sides.

Working Capital Management in Co-Operative Milk Producers Union Ltd”- Pondicherry

Working capital management in The Pondicherry refers to the administration of all aspects of current Assets and current liabilities. Generally the main components of current Assets are inventories, sundry debtors, cash and bank balances and other liquid Assets like short term/temporary investments. Similarly Current liability comprises of bank borrowings, trade creditors, bills payable, and other account payables with in a short period in a year. The corporate finance department’s managers evaluate and determine the levels and composition of current Assets and current liabilities. Evaluation of right sources, right timing and utilization of funds in respect of current Assets and current liabilities perpetually is the theme of working capital management. Here an attempt has been made to analyses the efficiency and efficacy in managing working capital and its component management namely

Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana

Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.