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It's an interest free loan from their suppliers. They also give interest free loans to their customers, so it's a two way street. Ultimately, they want to ge
by fludlight 12y ago
It's an interest free loan from their suppliers. They also give interest free loans to their customers, so it's a two way street.
Ultimately, they want to get more free loans from their suppliers than they give to their customers
- flomo 12y agoJust to reinforce this, I worked with a F50 which offered vendors standardized tiers of quicker payments, in return for discounts which were (much) more than whatever their expected interest income would be. The terms weren't negotiated, they were just spit out of spreadsheet based on the interest rate. I understand the importance of "cash flow", but the real goal seemed to be shaving every nickel to maximize profitability on the deal.
- fludlight 12y agoThe relative importance of cash flow vs. income is dependent on the availability of capital. A business might take that 2% discount IBM offers to pay now vs. in a month if they are out of working capital and worried about making payroll.
- sebastianconcpt 12y agoYeah, I've heard that Carrefour does it that way