What it means
A company sees another buyer reporting longer supplier payment terms and considers asking every vendor for the same number of days, but that number may reflect different contract types, bargaining power, geography and actual payment behaviour. Benchmarking helps frame a negotiation only when the comparison is like-for-like.
KPMG's 2025 Supplier Payment Terms Index studies published standard terms among large Dutch companies, and its sample is not a global rule. BCG warns that extending terms can carry hidden supplier costs, and together the two show why a market reference needs commercial context.
Define what is being compared, since written due dates, days payable outstanding and actual days to pay are different measures and a supplier may offer 30-day terms while invoices are routinely paid on day 45. Segment vendors, because materials, logistics, utilities and professional services have different economics and a single company-wide average conceals contracts with very different service risks.
Check geography, since local payment law and market practice vary and the country and business segment should be named before quoting any external benchmark. Confirm contract dates, because Net 30 may run from invoice date, receipt, approval or another defined trigger, so normalise the start event before comparing numbers.
Look at current behaviour by extracting due date, valid invoice receipt date and payment date from payable records, and exclude data errors and disputed invoices with an explicit rule. Separate lateness, because paying after the agreed due date is not a negotiated extension and it can harm suppliers and may trigger legal or contractual consequences.
Account for discounts, since a two-percent discount for early payment can outweigh the apparent cash benefit of waiting, so calculate the implied financing return and check actual terms. Include supplier price, because a longer term can cause a vendor to increase price or withdraw a discount, so working capital savings are not the whole cost.
Check continuity risk, since a small supplier may need prompt payment to keep supplying and a liquidity squeeze at the vendor can become your stockout, and review alternative offers such as tiered prices, progress billing or early-payment options, comparing full economics rather than demanding one deadline. Ask what drives the gap, because an unusually short term may reflect credit risk, custom materials or a new relationship and a benchmark does not erase those reasons.
Check invoice quality, since bad purchase orders, missing receipts and tax errors delay payment and fixing process defects may matter more than changing written terms. Use a weighted view, since an average by invoice count can differ greatly from one weighted by spend, and review supplier concentration, because a critical sole-source vendor deserves more attention than a small interchangeable purchase, while comparing similar credit quality, since large investment-grade buyers may receive terms unavailable to a small or newly formed firm and a peer figure should not be presented as an entitlement.
Set a negotiation range using verified market information alongside supplier cost, relationship value and expected order volume, and model cash timing, because a ten-day extension on a monthly spend base offers a rough one-time release of cash, not a recurring profit gain, while communicating the approved effective date and covered invoices so unilateral changes do not create disputes. Pay accurately and measure the share paid within agreed terms, since a longer agreed term does not justify lost invoices or late processing, and monitor DPO carefully, because it can rise because of planned terms or because overdue balances accumulated, so pair it with overdue ageing and vendor complaints; for an owner, benchmarking is a way to test options, not a permission slip to pay later, and the aim is to preserve supplier trust while understanding the real cash and cost effects.
In practice
Real-world examples.
Example
A buyer compares net-30 material contracts with similar supply contracts, not with utility deposits. It uses the same start event for every contract. The comparison then supports a realistic negotiation range.
Example
Two firms have the same DPO, but one pays on agreed terms and the other has overdue invoices. The first has a genuine extension, while the second is building up late balances. The overdue ageing report shows the difference.
Example
An early-payment discount makes a shorter term more valuable than a longer cash float. The buyer calculates the implied return from paying early and compares it with its borrowing cost. It pays early only for suppliers where the return is higher.
Formula
Calculation
Illustrative spend-weighted agreed days = sum(contract spend x agreed days) / sum(contract spend). This is not actual payment performance.
Worked example. A fictional buyer has a $100,000 purchase at 30 days and a $300,000 purchase at 60 days.
- Weighted agreed days = ($100,000 x 30 + $300,000 x 60) / ($100,000 + $300,000) = ($3,000,000 + $18,000,000) / $400,000 = 52.5 days.
- A simple average of the two terms would be (30 + 60) / 2 = 45 days, which understates the larger contract.
- Cash timing: a ten-day extension on $100,000 of monthly spend releases about $100,000 x 10 / 30 = $33,333 once, not every month.Case study
Seen in the real world.
This entirely fictional example follows Harbor Kitchens. Procurement saw longer published terms at larger Dutch buyers but checked its own supplier mix and local contracts first. It negotiated an extension only with a willing large vendor and kept faster payment for a critical small supplier. The case does not claim the Dutch sample sets terms for other countries.
Harbor Kitchens also found that several invoices were paid at day 45 against 30-day terms, so it fixed its approval delays before asking anyone for more time. The change improved supplier relations at no cost and gave procurement a cleaner base for its negotiations. The story is illustrative and invented.
Watch out
Common mistakes.
- Presenting one country-specific sample as a global payment norm.
- Calling overdue invoices a negotiated improvement in terms.
- Ignoring supplier price, discounts and continuity risk when extending terms.
Questions
People also ask.
Which number should be compared?
State whether it is a written term, actual payment delay or DPO.
Should the longest peer term be adopted?
No. Compare contract type, country, supplier risk and total economics.
Can longer terms save cash?
They may release working capital, but prices and supplier resilience can change.
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