Proctor & Gamble is planning to to move its payment terms to 75 days (from 45) for its suppliers, a shift that could free up as much as $2 billion in cash for the consumer products giant. To help suppliers deal with the changes, P&G is working with banks that will offer to advance cash to suppliers after 15 days for a fee. The changes are expected to be phased in over three years and ultimately could affect hundreds of companies.

However, the companies, like P&G, that hold on to cash longer create deficits at suppliers that have to find financing, raise prices or squeeze other firms along the supply chain. Smaller companies with little bargaining power and less access to credit ultimately could see their costs rise as they pay for supply chain finance costs, pinching funds that could otherwise be spent on hiring or investments.

Large companies in the US are saying their extended payment terms just becomes a cost of doing business with them. And it is going to get worse: Citi have found that firms are trying to position themselves for growth when the economy picks up by making sure these extended payment terms are locked in.

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Extending payment terms and then offering supply chain finance is not a panacea, it won't always work. The risk in pushing out payment terms is that it puts financial strain on companies that supply key inputs and are themselves big employers. Unhappy suppliers could try to respond by taking their business to rivals, reducing the cost of producing their products or raising their prices, increasing costs for buyers.