Shorter supplier terms can widen a long customer payment gap
Measure the effect of shortened supplier credit on a job already operating with long customer payment terms.
Corporate Recovery Partners
01 / 06
Only one side of the timetable changes
Suppose a customer normally pays a job on day sixty. Your estimate assumed the main materials bill would be paid on day thirty. The supplier now requires payment on delivery, but the customer's terms remain unchanged.
The sales price and expected receipt have not moved, yet the funding period has lengthened. Revisit the cash schedule when either side changes, not only when the customer requests slower payment.
Ask the supplier whether the new terms apply to future orders, particular products or an existing commitment. Check the agreement and written correspondence before assuming every outstanding invoice has a different due date.
Keep any disagreement visible and obtain advice where necessary. A planning assumption should reflect the supported position rather than whichever date is most convenient for the forecast.
Move the relevant payments to their actual expected dates while keeping the original customer receipt assumption unchanged for the first comparison. Include deposits or staged supplier payments where applicable.
business.gov.au's cash flow statement method follows the timing of incoming and outgoing money. It helps reveal a funding change that may not appear in a simple job profit calculation.
Review when the job now needs funding and for how long. Include overlapping commitments elsewhere in the business before deciding the change can be absorbed from available cash.
An unchanged total job cost does not mean an unchanged cash requirement. Paying the same amount earlier may leave less money available for another obligation during the intervening weeks.
Discuss whether staged deliveries, different ordering dates or another agreed arrangement could fit the work. Consider operational and contractual consequences before moving purchases purely to improve a spreadsheet.
If finance is being considered, use confirmed terms and obtain appropriate advice. Do not assume a lender will extend a facility simply because the supplier has shortened credit.
Explain the revised funding requirement to whoever approves new work. Keep the supplier change attached to the estimating assumptions so the old payment timetable is not copied into the next quote.
Review one material supplier-term change this week. The useful result is a cash plan that reflects both sides of the job, rather than a familiar customer payment date hiding an earlier outgoing commitment.
