How To Calculate Accounts Payable Turnover in Wave Accounting | Arithmix

Accounts payable turnover is a financial metric that measures how quickly a company pays off its suppliers and vendors. It is an important metric for businesses to track as it provides insight into their cash flow management and vendor relationships. In this article, we will discuss what accounts payable turnover is, when it is valuable to calculate it, and how to calculate it in Wave Accounting.

What Is Accounts Payable Turnover?

Accounts payable turnover is a ratio that measures the number of times a company pays off its accounts payable over a given period. It is calculated by dividing the total cost of goods sold by the average accounts payable balance during the same period. The formula for accounts payable turnover is:

Accounts Payable Turnover = Cost of Goods Sold / Average Accounts Payable

The cost of goods sold (COGS) is the total cost of the products or services sold by a company during a given period. The average accounts payable is the average balance of accounts payable during the same period. The higher the accounts payable turnover ratio, the more efficiently a company is managing its cash flow and paying off its suppliers.

When Is It Valuable To Calculate Accounts Payable Turnover?

Calculating accounts payable turnover is valuable for businesses in several ways. Firstly, it provides insight into the efficiency of a company's cash flow management. A high accounts payable turnover ratio indicates that a company is paying off its suppliers quickly, which can help to build strong vendor relationships and negotiate better payment terms.

Secondly, accounts payable turnover can help businesses identify potential cash flow issues. A low accounts payable turnover ratio may indicate that a company is struggling to pay off its suppliers, which could lead to late payment fees and damage to vendor relationships. By tracking accounts payable turnover, businesses can identify potential cash flow issues and take steps to address them before they become a problem.

How to Calculate Accounts Payable Turnover in Wave Accounting

Wave Accounting is a free accounting software that can help businesses track their accounts payable turnover. To calculate accounts payable turnover in Wave Accounting, follow these steps:

1. Log in to your Wave Accounting account
2. Click on the "Reports" tab
3. Select "Purchases" from the drop-down menu
4. Select the date range for the report
5. Scroll down to the "Accounts Payable Turnover" section
6. The accounts payable turnover ratio will be displayed

By tracking accounts payable turnover in Wave Accounting, businesses can gain valuable insights into their cash flow management and vendor relationships. This can help them to make informed decisions about their finances and improve their overall financial health.

How Do You Calculate Accounts Payable Turnover in Wave Accounting

Wave Accounting 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 Wave Accounting 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 Wave Accounting, 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 Wave Accounting 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 Wave Accounting 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.