Current Liability Management

Accounts payable are short-term obligations created by the franchisee in buying supplies, materials, or services associated with running the business. Liabilities must be managed as effectively as the assets in working capital. Generally, current liability management involves the financing of current assets. The rule of thumb for accounts payable management is to finance the current assets in such a way as to ensure that the asset is bought and paid for before the asset is fully depreciated. If net working capital is not properly managed, or seasonal sales dictate, the business owner may find it necessary to borrow for the short-term in order to have sufficient cash to purchase inventory or pay salaries. The cost of borrowing can be significant and can cause a drain on working capital. Borrowing funds is a normal and appropriate action for a business; however, it is the unexpected, unplanned borrowing of funds that runs counter to effective management of working capital. It is imperative to get the best price ( interest rate and financing terms ) possible if you borrow.

LSU's  Clock Tower