METHOD & GUIDANCE
How this calculation works
Enter figures from the same period and on a consistent VAT-inclusive or VAT-exclusive basis. Tool IQ recalculates every output immediately; nothing you enter is saved or sent to us.
How to use the result
Measure supplier-payment timing from consistent balances and purchases, then compare the annualised value of an early-payment discount with cash availability and borrowing cost.
Worked example
Average payables of 45,000 against 450,000 annual credit purchases produces 36.5 payables days. A 2% discount for paying on day 10 instead of day 30 saves 200 on a 10,000 invoice.
Common mistakes
- Using total cost of goods sold when only credit purchases belong in the denominator.
- Treating the annualised discount comparison as a guaranteed investment return.
- Paying early without protecting payroll, tax and operating liquidity.
Frequently asked questions
Is this calculator free?
Yes. It requires no account and stores no calculation inputs.
Can I use the answer for a formal filing?
No. It is a planning estimate, not accounting, tax, legal or investment advice. Confirm material decisions with a qualified professional.
Should I include VAT?
Use a consistent basis throughout. Businesses that recover input tax commonly model net figures; consumer-facing prices are often considered gross.
Continue the decision
- Cash Conversion Cycle Calculator — Connect inventory, receivables and payables in days.
- Cash Runway Calculator — Estimate how many months your available cash will last.
Method reviewed 26 July 2026. Figures are illustrative and calculated locally in your browser.