> For the complete documentation index, see [llms.txt](https://help.modelreef.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.modelreef.io/help/drivers-variables-and-timing/payment-terms.md).

# Payment Terms

This article explains how **payment terms** are represented in Model Reef.

You will learn:

* How to translate real world payment terms into delays.
* How payment terms affect Accounts Receivable and Accounts Payable.
* How payment terms drive cash timing without changing P\&L timing.

Payment terms are one of the main levers that connect operational reality to cashflow.

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### Payment terms as delays

In Model Reef, payment terms are modelled as **delays** between:

* The period when a transaction is accrued.
* The period when the corresponding cash is received or paid.

You set these in the variable timing settings using expressions such as:

* 0 days (cash at the same time as accrual).
* 30 days, 45 days, 60 days.
* 1 month, 2 months.
* 2 weeks or 4 weeks where models use weekly timing.

The engine then calculates when cash should move based on the model's periodicity and the exact delay you specify.
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### Customer payment terms

For **revenue variables**:

* Revenue is recognised in P\&L when earned.
* Customer payment terms define when cash is collected.
* If payment terms are longer than zero:
  * Accounts Receivable increases between accrual and cash collection.
  * The Cashflow Statement shows receipts when cash is received.
  * The Cash Waterfall uses the same cash receipt timing.

Typical patterns:

* Subscriptions with monthly billing and short payment terms.
* Project work with milestoned billings and longer payment terms.
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### Supplier and staff payment terms

For **COGS, Opex and Staff variables**:

* Costs are recognised in P\&L when incurred.
* Payment terms define when cash is paid to suppliers or staff.
* If payment terms are longer than zero:
  * Accounts Payable increases between accrual and payment.
  * Staff related accruals also appear inside the same payable bucket.
  * The Cashflow Statement shows payments when cash is paid.

Examples:

* 30 day supplier terms for materials.
* Monthly salary payments with short lags between accrual and pay date.
* Quarterly invoicing from key service providers.
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### Tax and interest payment timing

For **Tax and Liability variables**:

* Tax Expense and interest expense are accrued based on earnings and loan balances.
* Tax payment frequency and interest payment settings define when cash leaves the business.
* These are usually modelled via periodic delays rather than per transaction payment terms.

The underlying concept is the same: accrual first, cash later.
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### Modelling real world payment behaviour

To represent more complex behaviour such as:

* Part upfront, part on completion.
* Deposits and final balances.
* Mixtures of immediate card payments and delayed invoice payments.

You can use:

* Multiple variables for different payment patterns (for example card revenue vs invoice revenue).
* Different delays on each variable to reflect each pattern.
* Weighted combinations at the driver or assumption level to mix behaviours.

This keeps each variable's timing simple while still capturing realistic blended behaviour across the portfolio.
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### Reviewing payment term impacts

You can see the impact of payment terms by:

* Looking at Accounts Receivable and Accounts Payable trends in the Balance Sheet.
* Reviewing the **Change in net working capital** line in the Cash Waterfall.
* Comparing P\&L revenue and costs to cash receipts and payments over time.

Small changes in payment terms can have large effects on cash runway and funding needs, especially in growing businesses.
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***

## Related articles

* [Portfolio Company Forecasting](/use-cases/portfolio-funds-vc-pe-and-family-offices/portfolio-company-forecasting.md)
* [Build a Cashflow Early Warning System](/how-tos/dashboards-and-reporting/build-a-cashflow-early-warning-system.md)
* [EBITDA Logic](/help/financial-outputs-and-valuation/ebitda-logic.md)
* [Seasonality Inputs](/syntax/timing-syntax/seasonality-inputs.md)