The last few years have presented no shortage of economic and sourcing challenges. Inflation, tariff changes, and rising interest rates have finance leaders looking for every lever they can pull to protect margins and increase working capital. Any opportunity to free up cash is more than welcome from the C-suite.
The challenge is looking at your payment data differently. Not just as a record of what you’ve spent, but as a source of untapped value. Many businesses juggle thousands of vendor relationships, with AP professionals handling an average of nearly 6,500 manual invoices or over 20,000 automated ones per FTE annually, all while navigating intricate contract terms that create countless opportunities for errors. When your team is managing that volume, stepping back to optimize payment timing isn’t a lack of priority. It’s a lack of bandwidth and visibility. The good news? It’s a lot easier and faster than you might think.
If you already have AP Recovery audits in your toolkit to reclaim overspend and improve future savings, working capital optimization is a natural next step. It’s another way to make your payment data work harder for you.
While there are many scenarios that can lead to working capital inefficiencies, here are three that deserve your attention right now, plus a proven approach to act on what you find.
1. You’re Giving Suppliers Interest-Free Loans and Don’t Know It
Nobody sets out to pay suppliers early. But it happens constantly, and at scale it’s one of the biggest silent drains on working capital. This is one of the most overlooked drivers of trapped cash in any organization.
Here’s how it works. Your contract says Net 45. But your actual payment performance shows you’re paying in 28 days. That’s 17 days of your cash sitting in a supplier’s account for no benefit to you. On $500M in annual spend, that gap is enormous. A few days’ difference with a significant supplier can mean millions of dollars annually.
And it’s rarely one vendor. Across a large supplier base, early payments compound into a staggering amount of trapped cash that could be funding growth, reducing debt, or simply building a buffer in an uncertain economy.
So why does it happen? The usual culprits: system inconsistencies, bad invoice terms, manual overrides, exceptions processes. One of the most common scenarios is deceptively simple. A supplier gets renegotiated from Net 30 to Net 60. The new terms never get updated in the system. The supplier keeps getting paid at Net 30. Thirty days of working capital walks out the door, and nobody notices.
The fix starts with measuring your payment performance. Compare your actual results against your agreed terms, supplier by supplier. Calculate the gap. Quantify the value. In many cases the savings require zero supplier negotiation. They’re internal fixes hiding in your own systems.
2. Late Supplier Payments Are Costing You More Than You Think
Paying early is giving money away. Paying late is borrowing trouble.
When suppliers face consistent late payments, they don’t just absorb it. They protect themselves. Penalties and fees are the obvious cost. But the less visible damage is worse: padded pricing built into future contracts, tighter terms at renewal, and a steady erosion of trust that weakens your negotiating position exactly when you need it most.
As industry veterans often note, suppliers are great at getting paid, one way or another.
There’s also an operational cost that rarely gets measured. For many organizations, a significant portion of AP support volume comes from inquiries about unpaid or late invoices. The time and resources spent fielding those calls and resolving disputes adds up fast.
Here’s the uncomfortable truth: if you’re planning to ask a supplier for better payment terms while you’re consistently paying them late, you’ve already lost that negotiation before it starts. Cleaning up late supplier payments isn’t just about avoiding penalties. It’s about earning the right to ask for more.
A third-party partner can help by measuring your payment performance against contracted terms for each supplier, giving you the data to close the gap and rebuild confidence on both sides.
3. Are Your Competitors Getting Better Payment Terms from the Same Suppliers?
You’ve addressed early payments. You’ve cleaned up late payments. Now the bigger question: are your terms actually in line with what the rest of the market is getting?
Most companies have no idea. They negotiate terms at the start of a relationship, maybe revisit them at renewal, and assume they’re in a reasonable range. But without benchmarking your days payable outstanding against industry peers, you’re negotiating without full visibility.
Consider this scenario: you’re paying a major supplier at Net 42. You think that’s standard. But their peers in the same spend category are getting Net 60, Net 75, even Net 90 from you. And publicly available data shows the supplier accepts 75-day terms from other customers. You’re paying faster than almost everyone, and you didn’t even know it.
▶ See how a supplier playbook gives procurement teams the benchmarks and specific asks they need to negotiate with confidence.
The question isn’t whether your terms can be improved. It’s by how much, and with which suppliers first.
Given today’s cost of capital, a longer payment term can be significantly more valuable than it was even two years ago. Modeling different scenarios across your vendor base, by category, by region, by spend volume, is how you find the opportunities that move the needle.
The goal isn’t a blanket demand for longer terms across every supplier. It’s setting customized, data-informed targets that maximize value without damaging the relationships you depend on.
Turning Insights into Action: Working Capital Acceleration
Knowing where your gaps are is one thing. Having the tools and data to do something about them is another.
This is where many organizations get stuck. Internal teams can measure their own payment performance and identify that terms could be better. But when they sit down with a supplier and say “we want better terms,” the answer is usually no. Without external benchmarks and market data, there’s no leverage to move the conversation forward.
PRGX has built a Working Capital Acceleration program designed to bridge that gap. Getting started is easy — most clients can pull the data we need in under 20 minutes.
From there, PRGX analyzes your payment behavior and compares your terms against peer suppliers in the same spend categories. We then layer in proprietary, anonymized benchmarking insights that come from processing payment data for hundreds of large global companies, many of whom share the same suppliers. PRGX also reviews publicly available supplier data to see what terms those vendors accept from their other customers.
The result is a set of Custom Supplier Playbooks: negotiation briefs for your high-opportunity vendors, each with a specific recommended ask and the projected working capital impact quantified. Your procurement team walks into the meeting with data, not guesswork.
To sustain the gains, PRGX clients deploy Spend & Payment Insight™, a spend analytics platform that provides real-time visibility into payment performance across your supplier base. It tracks whether newly negotiated terms are actually being followed and surfaces new opportunities as your business evolves.
One specialty retailer recently used this approach to achieve a 7x ROI from a single supplier negotiation and over $10M in total working capital improvement.
Improve Your Working Capital Management Today
The opportunity is there. The data to act on it is more accessible than most companies realize. And the results can start showing up in weeks, not months.
Watch the on-demand webinar, Unlock Hidden Cash: Turn Spend Data into Working Capital Wins, for an in-depth look at ways to improve your bottom line.
Ready to take the next step? Speak with an expert about how PRGX can help you turn your payment data into working capital wins.