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As anyone who regularly deals with supply chain issues knows, buyers and suppliers of goods and services usually have conflicting interests. Supply chain managers at most companies are under pressure to improve the company’s cash efficiency, usually by extending payment terms to their suppliers. But many suppliers lack the financial strength or flexibility to adjust to longer payment terms. For example, if a supplier already has a highly leveraged balance sheet, increasing bank borrowing to finance short-term working capital may be prohibitively expensive. Extended payment terms may also expose suppliers to increased commodity or foreign exchange risk.

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