It’s about cash flow - plenty of fundamentally profitable companies go bust because of short-term cash flow issues, so if you can give yourself an extra two mon

It’s about cash flow - plenty of fundamentally profitable companies go bust because of short-term cash flow issues, so if you can give yourself an extra two months leeway from a financial perspective that can be huge for survival. Another simple way to look at it: If I am buying 10,000 widgets for £80 each and expect to sell them for £100 across the next three months, I either need to have £80,000 sitting in the bank that I then tie-up in phones, or I agree to pay £80,000 in three months (maybe it is then £85,000 due to credit terms) but then I can sell the phones before I buy them. It’s a minor example, but if you imagine you are a growing retailer and employ this strategy you can grow much faster than another retailer who doesn’t (and has to tie their cash up in stock). Above examples are very simplistic because it’s about stock, but same logic can be applied to other purchases - most cash spend a business makes should presumably deliver some sort of value, so paying later allows some of the value to be realised before payment is required. This is why cash flow is king.