CIMA F1 Syllabus D. Management Of Working Capital And Cash - Early Settlement Discounts (Creditors) - Notes ^{7 / 12}

Clearly it is best to take as much advantage of trade credit as possible. Paying later is almost always beneficial.

However, a company needs to ensure it does not annoy its vital suppliers by missing deadlines and also the company may seek to take advantage of early settlement discounts.

Early settlement discounts

Trade credit is a simple and often free source of finance. (It is not free, however, if an early payment discount is foregone)