STRETCHING TERMS OF PAYMENT TO SOLVE LIQUIDITY PROBLEM AT PT SUMBER ALFARIA TRIJAYA TBK

• Main Author: Tania, Ribka
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/34060
• Institution: Institut Teknologi Bandung

Within 2014-2017, PT Sumber Alfaria Trijaya Tbk experienced decrease in its liquidity with below-thanone figures. It means that the company would find difficulties in paying short term liabilities, which caused them to cling on debt to do so. This has forced them to pay much interest rate, up to 60% of operating profit in 2017, which is a double from 2014. To stop the streak, the internal and external analysis were conducted to find the root cause of the problem. Firstly, it was found out that average payment period has been decreasing over the said period, which influences cash conversion cycle, the time taken to wait for the cash after it was injected into the operation, which in turn affects liquidity. This lowering is due to fixed terms of payment for the suppliers of PT Sumber Alfaria Trijaya Tbk. There has not any negotiations to consider the terms of payment because PT Sumber Alfaria Trijaya Tbk concerns about the suppliers’ well being, especially their supply chain. To solve the problem, the author would suggest to stretch the terms of payment because it would increase average payment period and finally, improve liquidity. At the same time, the company could gain some amount of money which would have been opportunity cost if the terms of payment stretch were not conducted. For this, the author use Monte Carlo Simulation by simulating the interest gained from the bank if the terms of payment were to stretch. To be able to negotiate for terms of payment stretch, the suggested solution is to trade cash discount gained with the stretched period. By using the formula of cost of giving up cash discount, the author could get the result of the maximum proportion of cash discount that could be given up to trade with for the periods stretched. The result of the research is a 2.3-billion opportunity cost for 10 suppliers (1.8 billion is the net gain after tax) and the maximum cash discount for additional 1-28 days ranges from 0.02-0.46% out of 1% These would be implemented by applying negotiation principles, which specifically use integrative approach that focuses on win-win solution for both suppliers and PT Sumber Alfaria Trijaya Tbk. The reservation price or the lower limit for the negotiation is the aforementioned maximum cash discount for the corresponding stretched period.