Work in treasury or cash management long enough and it's unavoidable: a company hits a cash-flow squeeze, and one tactic inevitably rears its head—delaying accounts payable. But stretching AP isn't free money. It's a loan you're taking from your suppliers, and like any loan, it has a price, even if it never shows up as a line item.
What the "just extend payment terms" playbook misses
- Vendors reprice the relationship. Suppliers aren't naive. Stretch terms long enough and you'll see it show up as worse pricing, tighter minimums, or the good inventory going to someone who pays on time.
- You lose early-pay discounts that beat your cost of capital. A 2/10 net 30 term is roughly 36% annualized. Unless your cash is earning more than that elsewhere, taking the discount almost always wins.
- Supply-chain risk is a hidden cost. A stressed vendor is a vendor who might not ship. Stretching AP with a single-source supplier is a working-capital "win" that can become an operations crisis.
- It doesn't fix the underlying problem. If you're extending AP because DSO is bloated or inventory is too high, you're treating a symptom. Fix the cash conversion cycle, not just one lever of it.
Optimize the whole cycle, not the easiest lever
Real working capital optimization means balancing accounts payable, accounts receivable, and inventory together—not just squeezing whichever one is easiest to touch. Stretching AP can buy time, but it's borrowed time, and the interest is often paid in the currency of vendor goodwill and supply reliability.
Where does your team draw the line on extending payment terms? CurvedSpace can help you optimize the full cash conversion cycle instead of relying on a single lever.