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Supplier Payment Terms Cost Calculator

Enter your invoice amount, cost of capital and extra payment days.

How it is calculated

Paying later lets you keep the cash, so the tool prices the extra days at your cost of capital: value = invoice × (cost of capital / 100) × (extra days / 365). The invoice is in dollars, the cost of capital is an annual percentage, and extra days is the number of days added to the payment term. The daily benefit is invoice × (cost of capital / 100) / 365, which is the value of each additional day. It uses simple interest on a 365-day year with no compounding. All three inputs must be above zero. The tool measures only the financing benefit; discounts lost, late-payment fees, supplier price increases and the effect on the relationship are not included.

Worked example

An $80,000 invoice, a 9% annual cost of capital and 45 extra days. Daily benefit: 80,000 × 0.09 / 365 = $19.73 (19.726 before rounding). Over 45 days: 80,000 × 0.09 × 45 / 365 = $887.67. That is the financing value of paying on day 75 instead of day 30, which you can compare against any price increase the supplier asks for in return.

Try this example →

Common mistakes

  • Entering the total extra days since delivery rather than only the additional days. Moving from Net 30 to Net 60 is 30 extra days, not 60.
  • Entering the cost of capital as a decimal such as 0.09. The field is a percentage, so 9 is correct; 0.09 would give a value 100 times too small.
  • Using a monthly rate. The field expects an annual percentage, because the tool scales it by days over 365.
  • Ignoring what you give up. If the supplier offers a 2% early-payment discount, compare it with this value before stretching the terms; the discount can be larger.
  • Applying it to invoices that are already late. The figure assumes the longer term is agreed, and it does not include penalties or interest charged for overdue payment.

Sources

About this calculator

Stretching how long you take to pay suppliers — say from Net 30 to Net 60 — effectively gives your business an interest-free loan for those extra days, since you keep the cash working for you instead of handing it over. This calculator puts a dollar value on that by treating your unpaid invoice as capital retained at your company's cost of capital.

The formula is value = invoice amount × cost of capital (annual %) × extra days ÷ 365. A $100,000 invoice held an extra 30 days at a 12% cost of capital is worth roughly $986 — money you effectively earned (or avoided borrowing) just by delaying payment.

CFOs and treasury or procurement teams use this to evaluate whether renegotiating supplier terms is worth the relationship friction, and to compare it against early-payment discounts, which are the mirror-image trade: giving up this same value in exchange for a percentage off the invoice.

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Comments (1)

  • Editorial team

    A useful comparison is an early-payment discount. On 50,000, paying 20 days sooner gives up financing worth about 329 at 12 percent. A 2 percent discount would save 1,000, so taking it wins. That 2 percent for 20 days works out to roughly 37 percent a year. What discount, if any, does your supplier offer?

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