The Economics of Early Payment

Paying your suppliers early not only keeps your suppliers in business, but can provide double-digit percentage returns on your free cash.

If you are a regular buyer of materials, supplies and services, you may have considered how best to optimise your payment strategy. On the one hand, deferring payment to your suppliers gives you extra working capital to run your business, but on the other hand it can create havok in your supply chain.

It is likely that your suppliers would be prepared to give you a discount if you offer to pay them early. Rather than paying them 30 days or 60 days after invoicing, if you pay them immediately on approval you can stand to gain an additional 2-5% discount.