Payments as a Working Capital Tool

A lesson learned from the global financial crises was how critical free cash flow can be for corporates, their customers, and their suppliers. As businesses seek to unlock cash flow from day-to-day operations, savvy treasurers have discovered vendor payments as a means to extend payment terms while improving vendor health, writes Chris Bozek, Managing Director, Head of Global Trade and Supply Chain Products Bank of America Merrill Lynch.

The benefits of optimising the Cash Conversion Cycle (Days Sales Outstanding + Days Inventory Outstanding – Days Payment Outstanding), have, in theory, held great promise in improving both the income statement and balance sheet. Here, we outline a three-step roadmap that turns the theory into an action plan, with the goal of unlocking hidden cash while not increasing bank debt through the power of payments.

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By : admin /August 23, 2014 /Working Capital /0 Comment /

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