How long you take to pay suppliers
Work out the average number of days you take to pay suppliers, and see why stretching it helps cash but carries risks.
Task 1The payment period3 questions
Buying on credit works the other way round: you hold the supplier's money until you pay. The trade payables payment period is the average number of days you take.
It is trade payables ÷ credit purchases for the year × 365.
| Item | £ |
|---|---|
| Credit purchases for the year | 438,000.00 |
| Trade payables at the year end | 42,000.00 |
Tarn Valley's suppliers ask for payment within 30 days.
Task 2Credit from suppliers is not free of risk2 questions
Task 3When the period jumps3 questions