How to Manage Supplier Payment Terms as a Growing Business

Know your current creditor days

Creditor days = (trade creditors on your balance sheet ÷ annual cost of purchases) × 365. If your creditors are £80,000 and your annual purchases are £600,000, your creditor days are approximately 49. Compare this against your supplier terms: if most suppliers are on 30-day terms and your creditor days are 49, you are either negotiating extended terms or paying late. Know which it is.

Paying late without agreement is legally permissible but harms supplier relationships and can result in credit being withdrawn or prices increased. Negotiating extended terms upfront puts you in a stronger position.

Negotiate extended terms with key suppliers

Suppliers who value your business — because of order volume, growth trajectory, or strategic relationship — are often willing to extend payment terms. A direct conversation is usually the most effective approach: explain that you are managing working capital as the business grows and ask whether 45 or 60 days is possible.

Be prepared to offer something in return: a commitment to minimum order volumes, reduced invoice querying, prompt payment within the extended terms, or consolidating spend from multiple suppliers to one. Frame the negotiation as a partnership, not a demand.

Rationalise your supplier base to consolidate leverage

Spreading purchases across many small suppliers dilutes your leverage with each one. Consolidating spend with a smaller number of preferred suppliers increases your negotiating position on payment terms, pricing, and service levels. Before consolidating, assess the supply risk: concentrating too much spend with a single supplier creates vulnerability if that supplier fails or raises prices sharply.

Preferred supplier agreements — which commit you to a minimum volume in exchange for agreed payment terms and pricing — create predictability for both sides.

Use payment scheduling to optimise cashflow

Rather than paying invoices as they arrive, run structured weekly or fortnightly payment batches. Pay invoices on the last day they are due (not early), unless a supplier offers an early-payment discount that is financially worthwhile. This maximises the use of your trade credit without incurring late fees.

Accounting software can generate an aged creditors report showing which invoices are due each week, making it straightforward to schedule payments to minimise the risk of accidental late payment while holding cash for as long as legitimately possible.