Trade payables payment period

What the exam boards say

• Cambridge 0452 and 0985, 2027 to 2029: listed. Formula as printed: Trade payables / Credit purchases x 365 days.
• Cambridge, 2026 syllabus: listed. Formula as printed: Trade payables / Credit purchases x 365 (answer in days).
• Pearson Edexcel 4AC1: not named in the specification.
• OxfordAQA 9215: named as "trade payable days"; the formula is in OxfordAQA's separate guide, Formulae for accounting ratios.

Cambridge states that for 2027 to 2029 the printed formulas are the only ones accepted in candidate responses, so use the wording above for a Cambridge paper.

Sources: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), pages 18, 21; Cambridge IGCSE Accounting 0452: syllabus for examination in 2026 (Version 2, December 2025), page 19; Pearson Edexcel International GCSE in Accounting (4AC1) specification (FT Sept 2017) (Issue 1, October 2016), page 21; OxfordAQA International GCSE Accounting (9215) specification (FT Sept 2024) (Version 1.2), page 18. See all sources.

Worked example

(Trade payables RM4,000 ÷ credit purchases RM40,000) × 365 = 36.5 days.

How to interpret it

Taking reasonable credit helps cash flow, but paying too slowly can damage supplier relationships.

Using it in analysis

The payment period shows how long a business takes to pay suppliers it buys from on credit. Follow it over several years and compare it with a similar business. A period of 40 days means suppliers are paid in about 40 days on average.

A longer period can be a sensible use of supplier credit, because it keeps cash in the business. But if it keeps rising, the business may be struggling to find cash. That can damage supplier relationships, cost the business discounts and, in the worst case, end its credit. A falling period may reflect strong cash flow or a wish to earn early-payment discounts.

Example: credit purchases of RM292,000 and year-end payables of RM32,000 give (32,000 ÷ 292,000) × 365 = 40 days. The next year purchases are unchanged but payables rise to RM56,000. The period becomes (56,000 ÷ 292,000) × 365, about 70 days. This could be a deliberate choice to hold on to cash. It could also mean the business is short of money, so an analyst would check the cash position and liquidity ratios before deciding.

Common mistakes: believing a longer period is always good. Paying too slowly can cost goodwill and discounts, and can leave the business unable to buy on credit later. Using total purchases instead of credit purchases also distorts the figure, since goods bought for cash are paid for at once. The result is an average, and a large purchase just before the year end can throw it off.

Read it with the collection period. Ideally customers pay before the business must pay its suppliers, so customers' money helps fund purchases. If the collection period is much longer than the payment period, the business pays out before it receives and needs other finance to bridge the gap. A business that buys mostly for cash has a short or barely relevant payment period.

Limitations

Like the collection period, it relies on a single year-end figure.

Related ratios

• Trade receivables collection period