Control of Current Liabilities – Payables, Loans, Overdrafts

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  • Current liabilities: financial commitments that must be paid by a business in the short-term.
    • Minimising the costs related to a firm’s current liabilities is an important part of management.
  • Accounts payable: current liabilities (what you owe); control involves the periodic reviews of suppliers and the credit facilities they provide.
  • Loans – Short term loans and bridging finance are important sources of short term funding for business.
    • Management of loans is important, with particular attention to costs of establishment, interest rates and ongoing charges.
  • Overdrafts – Bank overdrafts are a convenient and relatively cheap form of short term borrowing. They enable a business to overcome temporary cash shortages. Banks may charge account keeping fees, establishment fees and interest.

Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.