How To Calculate Accounts Payable Turnover in Blackbaud | Arithmix

Calculating accounts payable turnover is an essential part of managing your business's finances. It helps you understand how efficiently your business is paying its suppliers and vendors. In this article, we'll discuss what accounts payable turnover is, when it's valuable to calculate it, and how to calculate it.

What Is Accounts Payable Turnover?

Accounts payable turnover is a financial ratio that measures how many times a business pays its suppliers and vendors in a given period. It's calculated by dividing the total amount of purchases made on credit by the average accounts payable balance during the same period. The result is the number of times the business pays its suppliers and vendors in a year.

For example, if a business has $1,000,000 in purchases made on credit and an average accounts payable balance of $200,000 during the same period, the accounts payable turnover ratio would be 5. This means that the business pays its suppliers and vendors five times a year.

When Is It Valuable To Calculate Accounts Payable Turnover?

Calculating accounts payable turnover is valuable for several reasons. Firstly, it helps you understand how efficiently your business is paying its suppliers and vendors. A high accounts payable turnover ratio indicates that your business is paying its suppliers and vendors quickly, which can help build strong relationships with them. On the other hand, a low accounts payable turnover ratio could indicate that your business is taking too long to pay its suppliers and vendors, which could damage those relationships.

Secondly, calculating accounts payable turnover can help you identify potential cash flow issues. If your accounts payable turnover ratio is decreasing over time, it could indicate that your business is struggling to pay its bills on time. This could be a sign that your business needs to re-evaluate its cash flow management strategies.

How to Calculate Accounts Payable Turnover

To calculate accounts payable turnover, you'll need to gather two pieces of information: the total amount of purchases made on credit and the average accounts payable balance during the same period. Once you have these figures, you can use the following formula:

Accounts Payable Turnover = Total Purchases Made on Credit / Average Accounts Payable Balance

For example, let's say your business had $500,000 in purchases made on credit and an average accounts payable balance of $100,000 during the same period. Using the formula above, your accounts payable turnover ratio would be:

Accounts Payable Turnover = $500,000 / $100,000 = 5

So, your business pays its suppliers and vendors five times a year.

In conclusion, calculating accounts payable turnover is an essential part of managing your business's finances. It helps you understand how efficiently your business is paying its suppliers and vendors, identify potential cash flow issues, and build strong relationships with your suppliers and vendors. By following the steps outlined in this article, you can easily calculate your business's accounts payable turnover ratio.

How Do You Calculate Accounts Payable Turnover in Blackbaud

Blackbaud 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 Blackbaud 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 Blackbaud, 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 Blackbaud 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 Blackbaud 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.