From the course: Supply Chain and Operations Management Tips

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Manage payment terms and cash flow

Manage payment terms and cash flow

From the course: Supply Chain and Operations Management Tips

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Manage payment terms and cash flow

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- In business, we're always negotiating around time, money and risk. Let's look at how the payment terms you negotiate with your customers and your suppliers can impact your risk and affect your financial performance. Let's start by looking at your suppliers. The simplest payment terms you can have with them are to pay on receipt or pay on delivery. In other words, you pay your supplier when they deliver the product. But some suppliers will require you to pay them in advance in order to lower their risk. Maybe they have to buy expensive materials to make your order and they're concerned that you might change your mind. By having you pay in advance, a supplier can mitigate their risk of doing business with you. On the other hand, a supplier might be willing to take on more risk in order to get more business. They can do this by offering net payment terms. Net terms are a form of credit, meaning that you can have their products now and pay for them later. For example, a supplier that…

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