Stretching payment terms is the first lever most finance teams reach for when cash gets tight. It feels free. Nobody has to cut a check today; the supplier eats the delay, and the problem looks solved on paper. It isn’t. It’s just relocated. A supplier who gets paid late once starts pricing in that risk on the next quote, or quietly moves your orders to the back of the queue when materials are scarce, and either of those costs more than whatever cash you held onto. 

The Hackett Group’s 2025 Working Capital Survey put a number on how widespread this is: $1.7 trillion sitting in excess working capital across the largest U.S. companies, about 35% of gross working capital and 11% of revenue. Most of that money isn’t trapped because payables aren’t stretched far enough. It’s trapped because inventory and receivables move too slowly, and stretching accounts payable further just hides that. 

Where does the cash actually come from, if not from supplier payments? 

Inventory is usually the real bottleneck 

For manufacturers, the cash conversion cycle leans heavily on inventory, not payables. Raw materials, work in process, and finished goods all sit on the books at once, and each layer adds its own delay before anything turns into cash. Shaving a week off production lead time, and you typically remove about a week of inventory carrying cost with it. A plant running $15 million a year in cost of goods sold that tightens scheduling by two weeks can unlock several hundred thousand dollars, without touching a single vendor’s terms. 

Collecting faster works the same way as paying slower, minus the fallout 

Days payable outstanding and days sales outstanding pull on the cash conversion cycle in opposite directions, but only one of them puts a strain on a relationship you need. Tightening up receivables, clearer terms, faster invoicing, and actual follow-up on overdue accounts frees up the same cash a payables stretch would, and nobody on the supplier side notices anything changed. 

Early payment discounts can lower your actual cost of goods 

This one feels counterintuitive until you run the numbers. Paying a supplier early for a 1% or 2% discount drops your cost of goods sold directly; it’s not just a cash flow timing trick, it shows up on the income statement. Suppliers who trust they’ll get paid on time also tend to quote better base pricing, because they’re not building late-payment risk into the number. Stretch the terms instead, and that risk usually gets baked into the next quote. 

Sometimes the cash is just leaking out from bad timing, not strategy 

A lot of trapped working capital has nothing to do with strategy. Its invoices are getting paid a week earlier than necessary because nobody set the system up to release payment exactly on the due date. Or it’s an invoice sitting in someone’s approval inbox so long that what should’ve been an on-time payment turns into an accidentally late one. Fixing the timing, not stretching the terms, is often the easiest win available. 

You can’t make a good call on holding cash if you can’t see the cash 

Teams without a clear, current view of their cash position default to caution, which usually means delaying payments even when the money is actually there. Real visibility, what’s coming in, what’s going out, what’s still sitting on a shelf as inventory, turns that guesswork into an actual decision. Payments only get held when there’s a real reason, not a vague one. 

Negotiate terms up front instead of stretching them after the fact 

There’s a real difference between sitting down with a supplier and negotiating realistic terms based on your actual cash cycle, versus a payment just showing up later than the invoice said it would. Suppliers respond to those two situations very differently. One builds trust. The other erodes it. 

Manual processing quietly eats the decision window you have 

Every day an invoice sits in an inbox waiting for someone to enter it and route it for approval is a day you’ve lost from your ability to time that payment intentionally. Automating the capture and approval side isn’t really about saving labour hours, even though it does that too. It’s about getting back the window to make a real choice about when a payment goes out, instead of reacting to whatever surfaces first in the queue. 

Can manufacturers actually do this without delaying supplier payments? 

Yes, and usually the better opportunity is sitting somewhere other than payables. Inventory days and receivables collection tend to hold more freeable cash than most finance teams expect, and early payment discounts can turn supplier payments into a cost-saving lever instead of a cash flow problem. The reason stretching payment terms feels like the obvious move is that it’s the most visible one, not because it’s actually where the biggest opportunity is. 

Stretching terms shifts the burden onto suppliers, who respond by raising prices, deprioritizing orders, or tightening their own terms elsewhere, often erasing whatever short-term cash benefit you got. And the reason inventory matters so much here is structural: manufacturers carry raw materials, work in process, and finished goods simultaneously, so trimming production lead time has an outsized effect on working capital compared to fiddling with payment terms. 

Let Forwardly help you pay suppliers on time without straining cash flow 

Keeping suppliers paid on schedule shouldn’t mean guessing at your cash position or letting invoices sit in an approval queue longer than they need to. 

Capture and code invoices automatically 

No more opening PDFs and typing in line items by hand. Forwardly’s AI-powered AP inbox reads the invoice, pulls the details, and matches it to the right PO automatically, with near 100% accuracy, no manual entry, no reconciliation delays. 

Pay on your own schedule 

Instant transfers for urgent suppliers, same-day ACH for routine payouts, scheduled payments for anyone on longer terms. Payments go out when you decide, not early by habit or late by accident. Everything syncs to your ERP on its own. 

Scale without adding headcount 

Push through a handful of payments or a few thousand through Forwardly’s payouts API or batch interface. Approvals route automatically by amount, vendor, or department, so a growing supplier network doesn’t mean a growing finance team. 

If you want to see what that looks like for your operation, check out Forwardly for manufacturing or get in touch directly.