Longer payment terms hold up when suppliers can get paid early on the buyer's credit
Back to the Trade Finance Guide
Ossiano Guides · Paying on terms
Every extra day of payment terms comes off the buyer's cash conversion cycle. Payables finance lets the supplier turn that longer wait into early cash, priced on the buyer's credit, while the buyer still pays on the due date.
Terms like this have a quick explainer. Tap or hover on them.
01 · The buyer's side
Each extra day of payment terms frees one more day of the buyer's cash
Payment terms are the number of days a buyer has to pay an invoice. A sale on terms is often made on : the goods arrive first and payment follows on the agreed date.
Finance teams track this with the . It counts the days a company's cash is tied up in trading. The standard formula, as set out by the Association of Corporate Treasurers, is simple. Add (how long stock sits) and (how long customers take to pay). Then take away (how long the company takes to pay its suppliers).
So longer terms with suppliers shorten the cycle, day for day. Take an illustrative buyer with 55 days of sales outstanding and 70 days of inventory. If its supplier terms move from 60 to 120 days, its cycle falls from 65 days to 5 days. The buyer's is tied up for 60 fewer days.
Large companies publish their own terms. Procter & Gamble says its supplier payment terms under its program generally range from 60 to 180 days, in its Form 10-K for the year ended June 30, 2026. Plexus reports days in accounts payable of 76 and days in inventory of 116 at July 4, 2026, in its fiscal 2026 third quarter earnings release. Plexus shows its payable days in brackets because they are taken away in its cash cycle.
02 · The supplier's side
Without a program, the supplier funds the longer wait at its own cost
The buyer's extra days are the supplier's extra wait. Until the invoice is paid, the supplier has to fund that gap itself, at its own cost of funds.
Here is an illustrative case. A supplier pays 9.00 percent a year for its funds. Carrying a $1,000,000.00 invoice costs it $15,000.00 over 60 days. Over 120 days it costs $30,000.00. These figures use simple interest on a 360-day year, the standard US money market basis named by the Alternative Reference Rates Committee and used in the Federal Reserve's H.15 rates.
gives the supplier a second choice. It can hold the invoice until the due date, or sell it early at a , according to the Global Supply Chain Finance Forum's payables finance page.
The finance provider relies on the buyer's credit and typically finances to the supplier, the GSCFF says. In plain terms, if the buyer does not pay, the provider does not come back to the supplier. Some stays in place for one case: if the supplier breaks the promises it made about the invoice, known as representations and warranties.
03 · The bridge
Payables finance prices the supplier's early cash on the buyer's credit
The cost of early payment is typically aligned with the credit risk of the buyer, according to the GSCFF's Standard Definitions for Techniques of Supply Chain Finance. The buyer in these programs is often called the , because its strength holds the program together.
Finance starts when the buyer approves the invoice for payment, unconditionally. That invoice becomes an . The provider then usually pays 100 percent of the invoice, less a financing discount, as the GSCFF describes.
Back to the illustrative invoice. On 120-day terms, the supplier takes cash on day 10 at a 5.50 percent program rate. The provider then waits 110 days for the buyer to pay, the of the finance. The discount for those days comes to $16,805.56. Carrying the same invoice at its own 9.00 percent rate costs $30,000.00. The gap is $13,194.44.
The buyer's side does not change. The payable stays due until its original due date, the GSCFF's Standard Definitions state, and the buyer pays the full $1,000,000.00 on that day.
Figure 1 · Try it
Extend the terms and see both sides of the invoice
Tap the pills to set the old and new terms and the two rates, then move the slider to pick the early payment day.
Payment terms before, days
Payment terms after, days
Supplier's own cost of funds, per year (illustrative)
Program rate, per year (illustrative)
Change in the buyer's cash conversion cycle
-
Supplier's cost to carry the invoice on the new terms
-
Program discount for early payment
-
How it works: the cash conversion cycle equals DSO plus DIO minus DPO, with the buyer's DSO fixed at 55 days and DIO at 70 days (illustrative); the carrying cost equals the invoice times the supplier's rate times the new terms, divided by 360; the program discount equals the invoice times the program rate times the new terms minus the early payment day, divided by 360.
Our Research Desk used simple interest on a 360-day year and the standard cash conversion cycle formula (DSO + DIO - DPO). The rates shown are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Actual costs vary with each party's credit, the program terms, the currency and the finance provider.
Programs where the buyer pays early from its own cash work differently. Our guide to dynamic discounting covers that case.
04 · The rules
Payment rules set outer limits in the EU and for US federal buyers
In the EU, payment terms between businesses should not exceed 60 calendar days. Longer terms are allowed only if the contract expressly agrees them and they are not grossly unfair to the supplier. This is Article 3(5) of Directive 2011/7/EU on combating late payment.
The same Directive gives public authorities 30 calendar days from receipt of the invoice. Member States had to bring their own laws into line by March 16, 2013.
In the US, federal agencies have a default too. When a contract sets no payment date, discount or faster method, payment is due 30 days after the payment period starts, under 5 CFR 1315.4.
Figure 2
Payment period rules and one filed benchmark
Read each row for the rule, who it covers and the period.
Sources: Directive 2011/7/EU, Articles 3(5) and 4(3), via EUR-Lex; 5 CFR 1315.4(g), eCFR as of September 25, 2026; Procter & Gamble Form 10-K for fiscal year ended June 30, 2026, supplier finance note.
Whether a longer term is grossly unfair in a given contract is a legal question. This guide states the rules only.
05 · Disclosure
Terms extended through a program show up in the buyer's reports
US buyers that use a report on it every year. Under , the Financial Accounting Standards Board requires the buyer to disclose the key terms of the program. It must also disclose the confirmed amount still unpaid at the end of the period, and a . That rollforward shows how much was confirmed and how much was paid during the year.
For IFRS reporters, the ask for similar detail. The IFRS Foundation lists the terms of the program, the amounts and where they sit in the balance sheet, the ranges of payment due dates, and liquidity risk information.
The filed numbers can be large. AT&T reported supplier finance program obligations of $4,455 million at September 30, 2025, up from $2,498 million at December 31, 2024, in SEC filing data. Procter & Gamble reported $5,790 million at June 30, 2025 and $5,559 million at June 30, 2024 (SEC EDGAR). Boeing reported $2,703 million at December 31, 2024 and $2,107 million at March 31, 2025 (SEC EDGAR).
Figure 3
Supplier finance obligations at two reporting dates
Hover or tap a bar to see the date and the amount as filed.
Source: US SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation for Procter & Gamble (FY2025 10-K), AT&T (Q3 2025 10-Q) and Boeing (Q1 2025 10-Q). Amounts as filed.
This section describes what the standards require companies to disclose. It does not assess how any program is reported.
06 · Development finance
Development lenders use the buyer's credit to reach smaller suppliers
The same idea works at scale in emerging markets. On June 23, 2026, the International Finance Corporation announced a facility with Banco Santander. It covers up to $500 million of assets and is expected to support about $1.5 billion of transactions over three years. It sits under IFC's Global Supply Chain Finance Program, launched in 2022, and lets emerging market suppliers get finance based on their buyers' credit.
IFC has used the same approach before. In 2016 it announced a partnership with the retailer KiK and the platform PrimeRevenue to give KiK's suppliers short-term working capital. The finance ran under IFC's $500 million Global Trade Supplier Finance program. Its tiered pricing lowered costs for suppliers that scored well on environmental and social performance.
07 · Ossiano view
Terms and funding work best when they are designed together
OBSERVATION 01
The due date and the cash date can differ
The buyer's payable stays due on its original date, per the GSCFF Standard Definitions, while the supplier chooses when to take cash. Terms length and supplier cash become two separate settings.
OBSERVATION 02
The EU gives a 60-day reference point
Directive 2011/7/EU sets 60 calendar days for business-to-business contracts unless expressly agreed and not grossly unfair. Programs running longer terms sit inside that express-agreement space.
OBSERVATION 03
Development lenders scale the same bridge
IFC's 2026 facility with Banco Santander covers up to $500 million of supply chain finance assets for emerging market suppliers financed on their buyers' credit, according to the IFC.
Summary
Longer terms help the buyer, and payables finance keeps the supplier funded
Each extra day of payment terms takes a day off the buyer's cash conversion cycle. Without a program, the supplier pays to fund that wait. Payables finance lets the supplier sell the approved invoice early. The cost is typically aligned with the buyer's credit, the provider usually has no recourse to the supplier if the buyer does not pay, and the buyer still pays on the original due date.
The EU sets a 60-day reference for business-to-business terms unless expressly agreed and not grossly unfair. US GAAP buyers disclose program terms and confirmed balances every year.
Related guides: Payables finance; Supplier payment terms for importers; Dynamic discounting; The cash conversion cycle; Working capital and trade finance; The trade finance gap.
Instrument cards: Payables finance; Dynamic discounting; Open account; Trade credit insurance. Every term on this page is defined in the Trade Finance Glossary.
For questions on how payment terms and supplier finance apply to existing or planned trade flows, contact the Ossiano Research Desk.
Sources
- European Union (EUR-Lex), Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions, February 16, 2011. Supports: 60 calendar day payment period between businesses unless expressly agreed and not grossly unfair, Article 3(5); 30 calendar day public authority payment period, Article 4(3); transposition deadline of March 16, 2013, Article 12(1).
- The Procter & Gamble Company, via SEC EDGAR, Form 10-K for fiscal year 2026, note: Supplier Finance Programs, August 4, 2026. Supports: supplier payment terms generally ranging from 60 to 180 days.
- AT&T Inc., via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000732717, October 31, 2025. Supports: obligations of $4,455 million at September 30, 2025 and $2,498 million at December 31, 2024 (Q3 2025 10-Q).
- International Finance Corporation, World Bank Group and Banco Santander partner to unlock working capital and jobs, June 23, 2026. Supports: facility covering up to $500 million of supply chain finance assets; about $1.5 billion of transactions over three years; IFC Global Supply Chain Finance Program launched in 2022; suppliers financed on buyer credit.
- Global Supply Chain Finance Forum, Payables Finance, technique page, October 31, 2024. Supports: seller may hold the receivable or sell it early at a discount; reliance on buyer credit and typically no recourse to the seller; recourse kept for breaches of representations and warranties; unconditional approval as the trigger for finance; 100 percent financing less a discount as the norm.
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance (ICC-hosted PDF), 2016. Supports: financing cost typically aligned with buyer credit risk (page 45); payable continues to be due until its due date (page 9).
- Financial Accounting Standards Board, Accounting Standards Update No. 2022-04, Liabilities: Supplier Finance Programs (Subtopic 405-50), September 2022. Supports: disclosure of key program terms, the outstanding confirmed amount and a rollforward of amounts confirmed and paid.
- Plexus Corp., via SEC EDGAR, Fiscal 2026 third quarter earnings release, Form 8-K Exhibit 99.1, July 29, 2026. Supports: days in accounts payable of (76) and days in inventory of 116 at July 4, 2026; cash cycle definition.
- Association of Corporate Treasurers, The cash conversion cycle (The Treasurer, Treasury essentials), October 2014. Supports: cash conversion cycle formula and days payable outstanding formula, page 46.
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market day count, used in the worked example and Figure 1.
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market rates annualized on a 360-day year, used in the worked example and Figure 1.
- US Government Publishing Office and National Archives (eCFR), 5 CFR 1315.4 Payment due date and payment period, September 25, 2026. Supports: default payment due date 30 days after the payment period starts for US federal agencies, paragraph (g)(1).
- IFRS Foundation, IASB increases transparency of companies' supplier finance, May 25, 2023. Supports: required disclosures of terms, amounts and balance sheet location, ranges of payment due dates and liquidity risk information.
- The Procter & Gamble Company, via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000080424, August 4, 2025. Supports: obligations of $5,790 million at June 30, 2025 and $5,559 million at June 30, 2024 (FY2025 10-K).
- The Boeing Company, via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000012927, April 23, 2025. Supports: obligations of $2,703 million at December 31, 2024 and $2,107 million at March 31, 2025 (Q1 2025 10-Q).
- International Finance Corporation, IFC partnership with KiK for supplier financing, July 18, 2016. Supports: KiK and PrimeRevenue partnership under the $500 million Global Trade Supplier Finance program; tiered pricing with lower costs for strong environmental and social performance.
The real economy moves through Ossiano.
