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What are considered the best practices for Accounts Payable when paying vendors, 30 days?

Cynthia McIntosh's Profile

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Yes. Your receivable is a payable to someone else. Pay vendors consistently and seek discounts on payments. If you will give me a discount, I will pay you within 15 days; but if no discount I will pay you on 30.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

While I think it is important to pay timely, the defiinition of timely can vary depending on industry. If you deal with the automotive and Tier One and Tier Two suppliers, getting paid in 90 days is a bonus. Having payment terms of 120 is not uncommon. When your receivables are delayed by that much, your payment terms for your suppliers will also change. An open dialogue with your suppliers can lead to an amicable relationship with terms that are greater than 30 days. Discounts on early payments only works when you have the liquidity to do so. If I am going to get a 2% discount on an early payment, but drawing on my Line of Credit costs me 3.85% or more - I won't be taking advantage of the discount offered.

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