Payment Terms Extension ROI Calculator

Quantify the cash freed and net annual return from negotiating longer supplier payment terms. Enter annual spend plus current and proposed days payable, then optionally layer in cost of capital, early-payment discounts, and enablement costs to surface net impact, ROI, and payback time.

Total purchases routed through accounts payable each year.
Average days you currently take to pay invoices.
Targeted days payable outstanding after renegotiation.
Optional. Default 8.00% if blank.
Optional. Default 0.00% of eligible invoices.
Optional. Default 100% of spend if blank.
Optional. Default $0.00 if blank.

Model assumes linear spend distribution through the year and that suppliers accept the proposed terms without altering pricing beyond the entered discount rate.

Examples

  • Spend $12,500,000, move from 30 to 45 days, 8% capital, 2% discounts on 40% of spend ⇒ 15 extra days unlock $513,698.63, carrying benefit $41,095.89, lost discounts $100,000.00, net −$58,904.11 (no payback, negative ROI).
  • Spend $8,000,000, extend 45 to 60 days, 10% cost of capital, no discounts, $25,000 enablement ⇒ $328,767.12 freed, annual benefit $32,876.71, ROI 10.00%, payback ≈ 9 months.

FAQ

What if only part of my spend can move to longer terms?

Adjust the share-of-spend field to the portion of vendors willing to renegotiate. The calculator scales the unlocked float and potential discount impact accordingly.

How should I treat supply-chain finance programs?

If you plan to offer supply-chain finance, include any platform or funding costs in the implementation cost so the net annual impact reflects the true cash lift.

Can I model a blended capital cost?

Yes. Input your weighted-average cost of capital or the marginal short-term borrowing rate to quantify the carrying-cost savings on the unlocked float.

Additional Information

  • Working capital released equals annual spend multiplied by the additional days payable divided by 365 (assumes even spend across the year).
  • Cost of capital reflects the annualised rate you otherwise pay to finance short-term needs; defaults to 8%.
  • Discount leakage assumes the specified percentage of spend would have captured the early-payment discount if you had paid sooner, so narrow the share to impacted suppliers.
  • ROI compares the net annual impact to the cash unlocked; negative figures indicate discount losses overwhelm financing savings.

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