Beware of Stealth Leverage

The tension between customers and suppliers has existed since the beginning of time. On one hand, customers wish to extend payable days to their suppliers, thus freeing up precious working capital and improving free cash flow. On the other hand, suppliers want to collect their receivables as quickly as possible for the very same reasons. Customers, often large, investment-grade companies, face a dilemma — extend payable days too far and risk hurting relationships with strategic suppliers or even potentially drive them out of business.