Estimate Supplier Cash Tied Up by Longer Customer Payment Terms

Key findings

• At a 19.03% customer share, a 30-day collection delay ties up about $15.64 million per $1 billion of annual supplier revenue under uniform sales.
• A delay changes receivables and financing needs without necessarily changing revenue or creating a credit loss.
• Customer revenue dependence is an input to a cash model; actual terms, aging and customer-level collections must supply the payment evidence.

A supplier can hit its revenue forecast and miss its cash-flow forecast because a large customer pays later. The immediate financial effect is a larger receivable to fund, rather than an automatic bad-debt expense.

Altsets' supplier revenue share helps size that cash requirement. It does not report customer payment behavior, so collection days must come from separate evidence or be stated as a scenario.

Put the customer share into a receivables calculation

Let R be annual supplier revenue, r the customer's revenue share and d the increase in average collection days. With uniform sales and unchanged volume, incremental receivables are approximately:

$$\Delta AR=R r\frac{d}{365}.$$

Use LG Energy Solution's displayed 19.03% Tesla share to normalize the arithmetic per hypothetical $1 billion of supplier annual revenue. This is not an estimate of LG Energy Solution's actual receivables or Tesla's payment terms.

At an assumed 8% annual funding cost, financing the 30-day scenario's additional receivable for a full year costs about $1.25 million. The interest rate and duration are scenario assumptions. If the balance lasts only a quarter, the funding cost is correspondingly smaller.

A delay and a loss belong in separate model lines

The revenue has already been earned in this simplified example. Cash is arriving later. A collectability problem would require an additional expected-loss assumption, based on credit and payment evidence; it is not encoded in customer concentration.

Likewise, an increase in company-wide days sales outstanding does not prove one customer is responsible. Seasonality, product mix, disputed invoices and other customers can affect the aggregate. The relationship coefficient identifies the customer whose terms could matter, not the cause of an observed balance-sheet change.

Research on bargaining power and trade credit connects weaker supplier bargaining power with more generous credit terms. That is a reason to investigate contractual terms, rather than to label a named customer a late payer without evidence.

The useful signal may appear before earnings weaken

A customer-concentration screen is incomplete if it models sales while omitting the cash needed to finance them. A concentrated supplier can have stable orders while short-term funding needs rise. A sales-only model would call the relationship unchanged.

For a systematic test, interact pre-existing customer revenue dependence with independently observed payment deterioration. Test later receivables, financing costs or free-cash-flow forecast revisions, controlling for sales growth and seasonality. A concentration feature by itself should not be expected to identify payment delays.

The customer deposit analysis examines cash received before delivery. Metric definitions are in the Altsets methodology.

Sources

• Altsets supply chain dataset
• Bargaining power and trade credit
• The role of customer stability in corporate trade credit provision
• S&P Global: Trade tariffs, payment behaviour and supplier trade credit limits

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Methodology

Read the methodology for this research.

Cite this research

Altsets Research. "Estimate Supplier Cash Tied Up by Longer Customer Payment Terms." Published September 23, 2026. https://www.altsets.com/research/major-customer-payment-delays-supplier-working-capital

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