Work out days payable optimisation instantly with clear inputs, formula shown and shareable results.
Extending days payable releases a one-off amount of working capital equal to the extra days multiplied by daily purchases, and the recurring benefit is that cash at your cost of capital. It is genuine value only where the extension is agreed rather than imposed.
Cash released
Cash released = (Target DPO - Current DPO) x Annual purchases / 365
Annual benefit
Benefit = Cash released x Cost of capital %
No. Suppliers price longer terms into the unit price, often at rates well above your cost of capital, so the net benefit can be negative.
Supply chain finance: you pay later while the supplier is paid early at your credit rating. Both parties gain and the pricing stays honest.