USA Extending Payment Terms

[Connor]

Please help explain exactly how extending vendor payment terms will impact cash flow.

i.e. moving sales from a vendor with 4 day terms to a different vendor with 30 day terms.

 

[Steve-LevelUp]

The longer the payment terms are, the longer the company can hold on to their cash, thereby leading to an overall larger cash balance. You ideally want to have average payment terms to vendors (DPO) longer than your average terms to customers (DSO). you want to be sure that your customers are paying you before you need to pay your suppliers.