Overview
The What-If Simulation: Working Capital calculator shows the effect of payment timeliness on working capital. This interactive simulation tool helps you understand the financial impact of paying invoices earlier or later than current practices.
Common Uses
- Analyze how working capital will be affected if invoices are paid earlier or later
- Model the financial impact of payment policy changes
- Optimize payment timing for cash flow management
- Understand trade-offs between working capital and supplier relationships
- Support strategic decisions about payment practices
Settings
Payment Timeliness Attribute: Select the attribute that represents payment timeliness (number of days early or late). To set up this attribute, refer to the Enrichment documentation.
Due Date Attribute: Select the attribute that represents when the invoice should be paid.
Invoice Paid Late Attribute: Select the attribute that represents the actual date when the invoice was paid.
Total Amount Value Base Attribute: Select the attribute that represents the total invoice amount.
Number of Months: Specify the number of months to base the analysis on (e.g., last 12 months).
Paid Late Is Bad: Check this box to indicate that paying invoices late is undesirable in this analysis (affects visualization colors and trend indicators).
Example
Analyzing Working Capital Impact of Payment Timing
Scenario: You want to understand how your working capital would be affected by changing your payment timing practices.
Settings:
- Payment Timeliness Attribute: Payment Timeliness
- Due Date Attribute: Invoice Due Date
- Invoice Paid Late Attribute: Invoice Paid Date
- Total Amount Value Base Attribute: Total Invoice Amount
- Number of Months: 12
- Paid Late Is Bad: Checked
Output:
The calculator displays an interactive panel with a slider at the bottom. Use the slider to simulate different payment timing scenarios.
Scenario 1 - Pay 5 Days Late:
- Working Capital Impact: +$182,000 (increase)
- Average Payment Days: 27 days
- Interpretation: Holding onto cash longer increases working capital but may damage supplier relationships
Scenario 2 - Pay 5 Days Early:
- Working Capital Impact: -$1,000,000 (decrease)
- Average Payment Days: 17 days
- Interpretation: Paying early reduces working capital but may earn early payment discounts and strengthen supplier relationships
Insights:
This simulation helps you:
- Balance competing priorities: Cash conservation vs. supplier relationships
- Quantify trade-offs: See exact dollar impact of payment timing changes
- Test scenarios: Model different payment policies before implementation
- Optimize timing: Find the optimal payment schedule for your business needs
- Support negotiations: Use data to justify payment terms with suppliers
Strategic Applications:
- Evaluate feasibility of early payment discount programs
- Plan cash flow requirements for different payment strategies
- Assess impact of payment term renegotiations
- Model effects of improved accounts payable processes
This documentation is part of the mindzie Studio process mining platform.