How the payment terms calculator works
Payment terms are one of the simplest levers in procurement finance. The longer you take to pay suppliers, the longer your cash stays with you. The calculator converts your annual spend into an average daily figure, then multiplies it by the additional days between your current and target terms to show the one-off working capital released.
Because that cash stays in your business every year, it also carries a recurring value: the calculator applies your cost of capital to the freed amount to estimate the annual financing benefit. The figures are directional and assume terms are extended fairly and sustainably — the healthiest way to do this is to standardise terms across your supplier base, often using credit terms so suppliers are still paid promptly.
Common questions
How do longer payment terms free up working capital?
Every extra day you take to pay suppliers keeps roughly one day of spend in your own bank account for longer. Extending average payment terms increases your days payable outstanding (DPO), which permanently releases a slice of cash back into working capital — cash you would otherwise have paid out earlier.
How does the payment terms calculator work?
You enter your annual procurement spend, your current average payment terms and a target term. The calculator works out your daily spend, multiplies it by the extra days you would take to pay, and shows the one-off cash freed. It then applies your cost of capital to estimate the recurring annual financing benefit of holding that cash for longer.
What is a good payment term to aim for?
It depends on your sector and supplier relationships, but many organisations move from around 30 days toward 45–60 days as they standardise terms. The aim is to extend terms fairly — long enough to improve your cash position without straining suppliers you depend on. Buying through a marketplace with credit terms can help standardise this across a fragmented supplier base.
Does extending terms hurt suppliers?
It can if it is done unilaterally. The healthier approach is to standardise terms across your supplier base and, where possible, use a platform that offers credit terms so suppliers are still paid promptly while you retain the working-capital benefit. This calculator estimates your side of the equation; a specialist can help you structure it fairly.
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