How do you calculate the working capital from longer payment terms?

Multiply the annual spend by the additional days and divide by 365. Moving 1,200,000 of spend from net 30 to net 60 holds back 30 days of spend: 1,200,000 x 30 / 365 = 98,630. At 8% that is worth 7,890 a year, or 6,390 in the first year after a 1,500 transition cost, the Supplier Payment Terms Impact calculator's own example.

Is the working capital a saving every year?

No. The working capital is released once, as the first payments move later. What recurs is its financing value: the interest you no longer pay, or the return the cash earns, at your financing rate every year.

How do you value an early-payment discount?

Annual return = discount / (1 - discount) x 365 / (term days - discount days). For 2/10 net 30: 0.02 / 0.98 x 365 / 20 = 37.2% a year. If that beats your financing rate, paying early is the better use of cash.

What financing rate should I use?

Your own: the interest rate on the credit line the cash would otherwise pay down, or your cost of capital if you have no debt. The example uses 9%. The workbook holds no market rate.

What if a supplier asks for shorter terms?

Type fewer proposed days than current days. The working capital and financing benefit turn negative: in the example moving a 920,000 machining subcontract from net 30 to net 15 ties up 37,808, costing 3,403 a year at 9%.

Does the workbook use macros?

No. It is a plain .xlsx with ordinary formulas, a table and native charts. The Verify sheet re-checks the formulas against fixed test suppliers and shows Self-check: PASS.

Planning and Supply Chain

Supplier Payment Terms Excel Template

Working capital released = annual spend × additional payment days ÷ 365, worth your financing rate every year. Give each supplier a row with its spend and current and proposed terms, and see the working capital, its financing value net of transition costs, and whether any early-payment discount beats your cost of money.

Free, and a plain .xlsx with no macros to enable. A CSV with live formulas and a printed how-to guide come with it.

Overview

This supplier payment terms template is a working Excel workbook for procurement, finance and treasury teams and owners of manufacturing businesses. Each supplier is one row with its annual spend, the payment days you pay at today and the days you propose; the workbook gives the working capital the change releases, its value at your financing rate and the first-year net value after any transition cost. It ships with ten suppliers of a fictional assembler, so every tile and chart is filled in when you open it.

In the example moving most of 9,060,000 of annual spend from net 30 towards net 60 releases 484,932 of working capital, worth 43,644 a year at 9%, or 20,144 in the first year after transition costs. Two suppliers do not pay back in year one: the coater, whose new terms come with a 9,000 one-off price uplift, and the machining subcontractor, moved to net 15 to secure capacity, which ties up 37,808.

Two suppliers offer 2/10 discounts. Paying the fastener supplier on day 10 instead of day 45 earns 21.3% a year, and the MRO supplier's 2/10 net 60 earns 14.9%, both above the 9% financing rate, so both discounts are worth taking. The download is a plain .xlsx with no macros. A CSV with live formulas is also included for other tools; the dashboard, charts and self-check are in the .xlsx.

What this template includes

Suppliers table, one row per supplier: annual spend, current and proposed payment days, one-time transition cost, and any early-payment discount with its discount days, with a Check column
Per supplier: additional days, working capital released, annual financing benefit, first-year net value and whether it pays back in year one
Early-payment discounts priced as an annualised return and compared with your financing rate: take the discount or pay at term
Dashboard with four tiles (working capital released, annual financing benefit, first-year net value, suppliers not paying back), working capital by supplier, discount returns against your financing rate, and the supplier table
Method sheet with every formula, and a Verify sheet that re-checks the formulas against an independent reference and the Supplier Payment Terms Impact calculator (Self-check: PASS)
CSV with live formulas for the Suppliers table; the dashboard, charts and self-check are in the .xlsx

Suggested use case

Use it before a terms renegotiation to see which suppliers are worth the effort, to check whether a price concession for longer terms pays back, or to decide which early-payment discounts to take.

How to use it

On Setup, type your company, currency and annual financing rate.
On Suppliers, give each supplier a row: annual spend, current and proposed payment days and any one-time transition cost.
Where a supplier offers an early-payment discount, type the discount and its discount days (2% and 10 for 2/10 net 30).
Fix anything the Check column names.
Open the Dashboard: working capital released, the financing benefit, suppliers that do not pay back and discounts worth taking.

Frequently Asked Questions

How do you calculate the working capital from longer payment terms?: Multiply the annual spend by the additional days and divide by 365. Moving 1,200,000 of spend from net 30 to net 60 holds back 30 days of spend: 1,200,000 x 30 / 365 = 98,630. At 8% that is worth 7,890 a year, or 6,390 in the first year after a 1,500 transition cost, the Supplier Payment Terms Impact calculator's own example.
Is the working capital a saving every year?: No. The working capital is released once, as the first payments move later. What recurs is its financing value: the interest you no longer pay, or the return the cash earns, at your financing rate every year.
How do you value an early-payment discount?: Annual return = discount / (1 - discount) x 365 / (term days - discount days). For 2/10 net 30: 0.02 / 0.98 x 365 / 20 = 37.2% a year. If that beats your financing rate, paying early is the better use of cash.
What financing rate should I use?: Your own: the interest rate on the credit line the cash would otherwise pay down, or your cost of capital if you have no debt. The example uses 9%. The workbook holds no market rate.
What if a supplier asks for shorter terms?: Type fewer proposed days than current days. The working capital and financing benefit turn negative: in the example moving a 920,000 machining subcontract from net 30 to net 15 ties up 37,808, costing 3,403 a year at 9%.
Does the workbook use macros?: No. It is a plain .xlsx with ordinary formulas, a table and native charts. The Verify sheet re-checks the formulas against fixed test suppliers and shows Self-check: PASS.