Business Glossary
What Are Supplier Payment Terms?
Supplier payment terms define when you must pay suppliers after receiving their invoice. Standard UK B2B terms are 30 days, though larger buyers negotiate 45, 60, or 90-day terms. Managing payment terms effectively is a key working capital lever.
The Formula
Cash Benefit of Extended Terms = Additional Days × (Annual COGS ÷ 365)
Worked Example — UK SME
A UK distributor negotiates 60-day terms with a key supplier (currently 30-day). Additional 30 days × (COGS £640,000 ÷ 365) = £52,600 of additional cash permanently in the business — from a single negotiation at no cost.
UK Benchmark
📊 UK SMEs should review supplier payment terms annually. Large buyers routinely achieve 60–90-day terms. Most SMEs never ask and rarely receive terms longer than 30 days as a result.
Common Questions
What is the UK Prompt Payment Code?
A voluntary code committing large businesses to pay suppliers within 60 days. It applies to the large company’s behaviour as a buyer — it does not restrict what terms you can offer your own suppliers.
Can I negotiate better terms without a long relationship?
Yes — particularly if offering reliable volume. Offer direct debit payment. Propose longer terms in exchange for committing to a specific order volume.
What is dynamic discounting?
Allows suppliers to receive early payment in exchange for a small discount. From a buyer’s perspective, it can generate a short-term return better than savings rates. From a supplier’s perspective, it accelerates cashflow at a cost.
Related terms