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Jan 10, 2011


Leo Schlosberg

"This is another way to make profits look better than they are.." The flow of cash has no impact on profitability as measured by virtually any accounting method. The payable is recorded/accrued as a liability when it occurs (typically on receipt of invoice from supplier) What's surprising about this is that is more common in a high-interest environment. Right now the rewards for holding onto cash are relatively low.

Kevin Quigley

This is standard practice here in the UK. Half my customers pay on 90 days no matter what you say or threaten them with. The argument is that delaying payments assists companies who have seasonal variations in orders, or companies that are growing or expanding, who need additional cash reserves.

What it means is that suppliers are acting as a short term bank. I think this has more to do with banks being unwilling to extend overdraft facilities.

As the commenter said above, the value of the outstanding invoice is lodged so withholding it has no effect on profit and loss (and so taxation). It only has an effect on cashflow.So, what is surprising is that companies with huge cash reserves, like Apple, take this stance.

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