Supplier payment terms are the number of days between receiving goods and paying for them. They are the strongest lever in the cash cycle: the longer the term, the more the business carries inventory on the supplier's money rather than its own. Terms are a negotiating item separate from price. An e-commerce business that buys everything upfront hits a cash squeeze as it grows.
In a terms negotiation, payment discipline is worth more than price; a buyer who pays as promised is given longer terms over time. In Turkey terms are usually set with cheques or an open account, and in an inflationary environment the cost of the term is priced in; that is why an early-payment discount and the deferred payment surcharge have to be compared side by side. Imports are different: letters of credit and advance payment are the norm and terms barely exist, which fundamentally changes the cash burden between domestic and imported supply.
Cash cycle = Days of inventory + Days to collect − Supplier payment days
If stock clears in 70 days, collection takes 15 days and supplier terms are 60 days, the cash cycle is 25 days.
In a terms negotiation, payment discipline is worth more than price; a buyer who pays as promised is given longer terms over time. In Turkey terms are usually set with cheques or an open account, and in an inflationary environment the cost of the term is priced in; that is why an early-payment discount and the deferred…
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