Inventory, receivables, and payables

The ValueModel checks whether your Inventory conversion period, receivables collection period and payables deferral period forecast deviates substantially from the past.

The reason for this check is, that these items usually don’t deviate much from the past without a good reason.

Inventory conversion period

The inventory conversion period usually does not change drastically. However, there are some exceptions for example if the composition of products as part of total revenue changes or the firm introduces new products that gain in popularity. If your forecast deviates substantially from the historical number, we expect you to justify your input with good arguments.

Receivables collection period

Accounts receivable are usually connected to the firm’s revenues. AR can change over time when the company is changing its credit policies or adds new payment methods for their customers. If your forecast deviates substantially from the historical number, we expect you to justify your input with good arguments.

Payables deferral period

AP depends on the credit term the firm has with their suppliers. As the company grows or gains more bargaining power, credit terms usually increase and so does AP. If your forecast deviates substantially from the historical number, we expect you to justify your input with good arguments.