4 Steps to Manage Your Vendors and AP to Increase Cash Flow

By Jon Orr, Managing Director, Optimas Financial & Accounting Solutions

Improve your accounts payable key performance indicators (“KPIs”) to increase cash flow by increasing the amount of credit you receive from your vendors:

1.   Do not pay an invoice any earlier than needed. Take full advantage of your existing credit lines and terms offered by your vendors.

2.   Increase your credit lines with your vendors. If you have demonstrated a consistent payment history with your vendor, many times they will increase your credit line if you request it. If not, locate alternative suppliers that will provide better terms.

3.   Improve your payment terms with vendors. Realize that your company has negotiating power (but recognize that this power is greater with some suppliers than with others). For example, if current terms offer a 1% discount for payment in 10 days with the full amount due in 20 days, negotiate with the vendor to receive 1% in 20 days with the full amount due in 30 days.

4.   Negotiate Seasonal Credit Lines. If your business is seasonal, where you require more cash in some parts of the year than others (e.g., retail businesses stocking up inventory for the holiday season), negotiate longer seasonal payment terms and higher seasonal credit lines.

If you would like more information on how Optimas can help you with your accounting and finance needs, please contact us at 630-780-1042 or email us at info@optimasllc.com.

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Optimas provides cutting edge accounting services, professional financial analysis and advice to small and mid-sized businesses, turning their accounting and finance departments into profit centers. We offer business accounting and CFO services using the latest technology and economies of scale to lower costs and increase the quality, amount and timeliness of valuable financial information. Our CFO services also provide the expert financial analysis, insight and advice to accomplish each client’s strategic objectives and increase their profitability.