Creditors Days - How to Turn Supplier Terms Into a Cash Flow Advantage
Did you know that Creditors Days—the time you take to pay your suppliers—is one of the three major drivers of cash flow in your business? Many business owners overlook just how powerful this number can be.
Let’s start with Buying ‘Stuff’
The cash flow cycle often begins with acquiring materials, goods, or labour. These commitments are entered into before, at the start or during your business process, they typically need to be paid before the final product or service is created, delivered, invoiced, and so eventually paid for.
If your suppliers offer you credit – They become Creditors.
Think of it this way: every time a supplier gives you credit, they are giving you a short-term, interest-free loan. That means more cash stays in your bank account for longer, reducing your need for costly overdrafts or loans. It’s a win for your cash flow—as long as you manage it wisely.
Because if you can typically pay at the end of the following month (standard practice) instead of paying them straight way. Sometimes it can even be possible to stretch payment terms out to 60 or 90 days. This means if you can get paid quickly yourself – you reduce your Working Capital needs.
Here are a few simple ways to make your Creditor Days work harder for your business:
Review your Creditor Days regularly.
Don’t just “set and forget.” Regular reviews help you spot opportunities to improve terms or tweak processes as your business grows.
Negotiate win-win supply terms.
Don’t be afraid to talk with your suppliers. Look for ways to create win-win scenarios—extended payment terms, discounts for early payment, or volume-based deals can benefit you and them.
Pay suppliers on specific days.
Paying suppliers on scheduled days brings structure to your cash flow management, saves admin time, helps suppliers know when to expect payments and builds trust.
Communicate clearly.
Make sure suppliers follow your process— consistent procedures like using purchase orders, help to prevent errors and delays, and fewer surprises all round.
Track the impact.
Measure how changes in payment terms affect your cash flow and financial health. Data-driven decisions = better business. Improving your business’s financial health.
But here’s the big one:
Don’t abuse supplier relationships.
Just as you value reliable customers, your suppliers want to work with trustworthy partners. Late payments can damage your reputation, your credit rating, to being put on stop, moved to pro-forma payment, and even cut you off from the best pricing and support.
Strong supplier relationships are just as vital as strong customer relationships. Manage them with care—your cash flow (and your business) will thank you.
How do you manage your Creditor Days? If you need some help, book a meeting or contact us.
#CashFlow #BusinessGrowth #FinanceTips #SupplierRelationships
