The customer wants longer terms on a low-margin job.
Longer payment terms change the economics of a thin-margin job. Compare financing, collection uncertainty and cash capacity before agreeing to a later due date for future work.
Corporate Recovery Partners
01 / 06
The customer asks for another month
A packaging business wins a low-margin order from a large customer. Before accepting, the customer asks for substantially longer terms. The sales team wants the volume, while accounts worries that materials and wages must be paid much earlier. The decision needs more than a comparison of selling price and purchase cost.
Review the order costs, delivery requirements and agreed price. Identify the margin available after direct costs and any special handling. Use a consistent basis so the effect of changed terms can be compared properly.
Do not rely on turnover as the reason to accept. A large order can occupy capacity and cash while leaving little to absorb delay or an unexpected cost.
Put supplier and operating payments alongside the proposed receipt date. Business.gov.au cash-flow guidance tracks these timings. Include any actual financing charges and the effect on other commitments.
Test a further delay beyond the requested term. The contractual due date is a planning assumption, not proof the customer will pay precisely when expected.
Consider price, staged billing, order size or delivery sequencing where suitable and lawful. Ask the customer what is essential rather than automatically conceding extra time without another change.
Business.gov.au recommends clear quote terms. Record the accepted payment arrangement in the relevant documents so sales, operations and accounts use the same version.
Compare the supported net contribution with the cash and operational exposure. Identify whether accepting the order prevents other viable work or requires borrowing that the business cannot sustain.
If terms cannot be made workable, decline or reduce the commitment before acceptance where possible. Existing contracts require separate advice; a poor margin is not permission to change them unilaterally.
