Welcome, I’m Gary Patterson. Let’s talk about the impact of accounts payable terms on your cash conversion cycle and your cost of goods. Simply said, the longer terms you give people on accounts payable, the slower that cash cycle works because the definition says you get ready to start something and it ends when the cash comes in so if you add ten days to the cash conversion cycle by changing those payable terms, you’ve impacted yourself and someone says oh, but I don’t see how that would impact cost of goods sold, well let me tell you this one, if you don’t do this right and you sort of decide to stretch your vendors a little, they’re going to start charging you more so the cost of the product goes up, hence the part that talks about it’s costing you on cost of goods sold. So the balance is do what it takes to optimally register how to do this, when to do it and the opportunity is that properly applied, credit can increase your sales and your profitability. Thank you.
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