Hi its Ewen Fletcher from Sharp Accounting. In this weeks cash flow video we are going to look at supplier credit terms. Now what are we talking about here?
Well you’d be familiar with your customer terms. As in how long and how many days you provide credit to your customers if you do provide credit. That may be in the form of 7, 14, 30 days credit.
What we are talking about today is the flip side of that which is the supplier side of things. How long are your suppliers giving you credit for?
Now, you might be in the scenario that you’ve just started your business and that it is all cash on delivery and that you don’t have any credit.
But over time, where you want to work to is having a similar level of days credit between your suppliers and your customers.
So if you’re offering your customers 30 days credit, you are therefore waiting 30 days to get paid and you’re paying you suppliers within 30 days.
So that way the money will come in from your customers and you will be able to pay your suppliers.
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Sharp Accounting is a local accounting firm in Ballarat. Sharp Accounting nurture business growth by adding value through collaboration and shared knowledge.