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Need More Cash? Extend Accounts Payable

Do you need to free up more cash in your operations? If so, you should take a deeper look at approaching your vendors to extend out payment terms on your accounts payables. Do you currently have 30 day terms on your A/Ps? Why not try for 45 or 60 days? According to an article on CFO.com entitled, “Six Ways to Stretch Payables“, “Often overlooked because of the relatively low status of accounts payable in finance departments, A/P thus provides an opportunity for…companies to hold on to their cash longer.”

How do you go about this? “Rather than blanketing all (vendors and suppliers) with the same request for improved terms, … divide vendors into different categories and then tailor the companies’ approach accordingly.” Not all suppliers will respond the same to a request to extend out your payment terms on your accounts payable. A large Fortune 500 supplier with whom you do a minimal amount of business won’t be as motivated to extend your payment terms as a Mom and Pop business with whom you do a singificant amount of business.

According to the CFO.com article, the vendor/supplier categories and their applicable approaches are as follows:

The “untouchables” – These vendors and suppliers have significantly more power than you as the buyer in your relationship, so you shouldn’t even attempt to get them to change payment terms.

The “squeaky wheels” – These vendors “may complain vociferously about such requests, they will in the end come to” an agreement. Therefore, it’s best to make the request to extend terms via a live, face-to-face meeting.

The “good soldiers” — These will “scream and yell and make lots of noise, but in the end they’re going to do what you ask them to do.”

The “wallflowers” – These vendors and suppliers need your “business so much that they’re in no position to refuse to come to terms.”

Click here to read the Six Ways to Stretch Payables article in its entirety.

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About Tiffany C. Wright

Hi! I,Tiffany C. Wright, am the author of the ebook, "Help! I Need Money for My Business Now!!" and the book "Solving the Capital Equation: Financing Solutions for Small Businesses", available on Amazon. I am the president of Toca Family Business Services, a short-term & project-based interim management & strategic and financial advisory firm, located in Atlanta, Georgia. In the past five years I've helped small and medium companies restructure and obtain over $31 Million in financing and a similar amount in purchase orders and contracts. I have an MBA in Finance and Entrepreneurial Management from the Wharton School of Business at the University of Pennsylvania and a B.S. in Industrial and Systems Engineering from The Ohio State University. Personal: I enjoy investing. I am a prodigious reader of everything from business books, magazines, and newspapers to horror and popular fiction. I read 4-6 books per month. I also love to travel. I've been to 33 countries on 5 continents and lived in Japan for 2.5 years and aim for a foreign locale twice a year. I am also an athlete and run track on the Master's Circuit. The highlight was placing 7th in my age group in the 2007 World Master's Track and Field Championships in Italy.

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The Resourceful CEO, Tiffany C. Wright

the president of Toca Family Business Services, a strategic and financial advisory firm which provides short-term & project-based C-level management. She is the author of Solving the Financial Equation: Financing Solutions for Small Businesses, available on Amazon.

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