How To Calculate Accounts Payable Turnover in Apptivo | Arithmix

Calculating accounts payable turnover is an essential part of managing your business's finances. It helps you understand how quickly you are paying off your debts to suppliers and vendors. This information can be used to make informed decisions about your cash flow, budgeting, and purchasing strategies. In this article, we will explain what accounts payable turnover is, when it's valuable to calculate, and how to calculate it.

What Is Accounts Payable Turnover?

Accounts payable turnover is a financial ratio that measures how many times a company pays off its accounts payable during a specific period. It is calculated by dividing the total cost of goods sold by the average accounts payable balance during the same period. The result is the number of times a company pays off its accounts payable in a year.

For example, if a company has $1 million in cost of goods sold and an average accounts payable balance of $200,000 during a year, its accounts payable turnover would be 5. This means that the company paid off its accounts payable five times during the year.

When Is It Valuable To Calculate Accounts Payable Turnover?

Calculating accounts payable turnover is valuable for several reasons. First, it helps you understand how quickly you are paying off your debts to suppliers and vendors. This information can be used to negotiate better payment terms, manage cash flow, and make informed purchasing decisions.

Second, accounts payable turnover is an important metric for investors and creditors. It shows how efficiently a company is managing its cash flow and paying off its debts. A high accounts payable turnover ratio indicates that a company is paying off its debts quickly, which is a positive sign for investors and creditors.

How to Calculate Accounts Payable Turnover

To calculate accounts payable turnover, you need to follow these steps:

1. Determine the total cost of goods sold during the period you want to measure. This information can be found on your income statement.
2. Determine the average accounts payable balance during the same period. To do this, add the accounts payable balance at the beginning of the period to the accounts payable balance at the end of the period and divide by two.
3. Divide the total cost of goods sold by the average accounts payable balance. The result is the accounts payable turnover ratio.

It's important to note that accounts payable turnover should be calculated for a specific period, such as a month, quarter, or year. This allows you to track changes in your payment patterns over time.

In conclusion, calculating accounts payable turnover is an important part of managing your business's finances. It helps you understand how quickly you are paying off your debts to suppliers and vendors, which can be used to make informed decisions about your cash flow, budgeting, and purchasing strategies. By following the steps outlined in this article, you can easily calculate your accounts payable turnover ratio and use it to improve your financial management.

How Do You Calculate Accounts Payable Turnover in Apptivo

Apptivo itself isn’t naturally geared towards letting you calculate complex metrics like Accounts Payable Turnover. As an alternative, teams typically use products like Arithmix to import data from Apptivo and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Apptivo, combine it with data from other systems, and create calculations like Accounts Payable Turnover.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Accounts Payable Turnover in Arithmix

Calculating metrics like Accounts Payable Turnover is simple in Arithmix. Once you've created your free account, you’ll be able to import your Apptivo data, and use it to create natural language formulas for metrics like Accounts Payable Turnover.

Arithmix is designed to give you the power to build any calculations you want on top of your Apptivo data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.