1. CORPORATE PURCHASING PAYMENT TERMS

2. History  In 2003, AA preserved cash by extending payment terms by 15 days  Today Disbursements continues to extend all supplier payments by 15 days unless there is an approved exception  Purchasing must approve most exceptions –Non-Purchase order suppliers must be controlled by the invoice approver  The goal is to extend all supplier terms by 15 days at contract renewal – optimal 45 days

3. Reminders  Stick to the process  Notify JRM and MD of all requests to change payment terms  If a you can not convince a Supplier to maintain their current payment terms, do not negotiate with them. Escalate the issue.  Any change to payment terms MUST be approved by the Purchasing Manager, MD and JRM  Purchasing Finance must receive a signed payment change form to capture the financial impact

4. If a supplier requests…...  Any change in Net days, even if they offer a discount –For example, requests to change from Net 30 to Net 20 or Net 10 or to change from Net 30 to 2% 10, Net 30  Prepayment  C.O.D.  Letter of credit  Cash deposit  Changes to frequency of invoicing  Fed Ex or wire payments  A trigger in a new or existing contract that will change terms  Reduced payment terms during contract renewal or if a contract is awarded to a new supplier that is offering different terms from the old supplier….. It MUST go through the process and be approved The Payment Term Change document is located - O:\SCM 2006\Process\Forms\Copy of Payment terms change form.xlsO:\SCM 2006\Process\Forms\Copy of Payment terms change form.xls