If you have 40K suppliers, and you receive invoices from 5% of them each month, then you would need to pay out about 20 million per month. If you pay that out immediately, then you are losing the opportunity to invest that money; For example, if you paid out 20 million after 60 days, then you could invest that 20 million for 60 days, maybe at a 6% interest rate. Over one year, you might be able to earn 2,400,000, thanks to good treasury management.
Sometimes your entities don’t well manage their accounts payable. Some entities are paying immediately, and they may argue that that is how they could negotiate with the supplier.
This could be true, but what if your staff are getting the money out, investing it for a while and then paying your suppliers?
They could be making a killing on it.
All they need is a friend at the bank to help them smooth through the process.
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