Supplier placement predicts timing and amount of payable relief
Ex Ante Estimation of Payable Relief and Compensation Timing for Supplier Selection
Social and Information Networks
Summary
Choosing which suppliers to work with affects how much and how quickly a company can delay payments without penalties. The authors created a measure called CCA that looks at past invoices to estimate the expected payment relief and when it will happen. They tested this on nearly 750,000 invoices and found that the measure reliably predicts payment timing and amount up to a year in advance. This helps businesses understand their cash flow risks before making supplier choices.
What this means in practice
- •For supply chain managers: Assess supplier choices based on predicted payment relief and timing to optimize working capital and reduce cash flow risks.
- •For accounts payable teams: Prioritize invoices for payment based on likelihood and timing of relief estimations to improve cash flow management.
Authors
Peplluis Esteva de la Rosa, Amogh Desmukh
Abstract
Supplier selection affects not only operating performance but also the payable network entered by a new obligation. This paper develops the Compensability Capacity Assessment (CCA), an ex ante buyer-supplier measure of expected gross payable relief and its likely timing. CPM provides the bounded structural kernel; concave CCA variants add bilateral invoice capacity. The measure is tested on 749,952 analytical invoices issued during 2012-2023, using frozen nine-month histories and future weekly, monthly, quarterly, semester, and annual windows. Cycle-restricted and path-enabled clearing are independent outcome-generating environments used to validate the measure, not technologies compared by this study. Across seven fully observed quarters in 2022-2023, log-CCA has a median Spearman correlation of 0.638 with future integrated relief; persistent relations carry 93.5% of relief, and the highest-scoring relation captures 92.5% of buyer-specific best relief. Predictability remains positive from week to year, with quarterly recalibration providing the best operating balance between signal, coverage, and timeliness. A timing analysis shows that, across the two validation environments, 89-91% of attributed relief occurs within seven days of invoice issue and 94-96% within thirty days, on average about sixteen days before contractual maturity. Log-CCA correlates 0.564 with thirty-day relief and 0.566 with relief-days. Its highest quartile has a 96.5% median probability of thirty-day compensation, compared with 57.6% in the lowest quartile. Conditional waiting-time prediction is weaker, so CCA should rank timely compensation opportunity rather than forecast an exact payment date. The findings link supplier placement, financial circularity, and working-capital exposure while motivating deployment, causal testing, and quarterly drift monitoring.