Supplier credit and payment terms: identify the cash-timing gap
The supplier expects payment on day 30, while the mechanical contractor forecasts the customer's receipt on day 55. New releases are using the remaining account limit. The owner needs to address the gap before another delivery is blocked.
Put supplier obligations and expected customer receipts on the same dated cash plan, then seek feasible terms and account capacity before orders rely on them. Confirm the due-date basis, credit limit and discount conditions in writing. An expected customer receipt does not automatically extend a supplier's deadline. A useful conversation seeks a documented agreement; it does not promise the supplier will accept the request.
Check dates, capacity and agreements
- Read the actual account terms. Identify when the payment period starts, invoice requirements, limit, deposits, charges and any order-specific conditions. Ask how pending or unbilled releases affect available credit. A phrase such as '30 days' is incomplete without its actual basis and applicable agreement.
- Compare realistic cash dates. Place supplier due dates beside expected customer receipts and other obligations. Financial guidance highlights the cash effect of mismatched customer and vendor terms. Include uncertainty and a late-receipt scenario rather than treating a submitted claim or profitable job as cash already available.
- Review options and discounts. With the appropriate financial people, compare agreed terms, phased releases, available funding and other practical options. Check whether an early-payment discount applies and whether funding it suits the whole cash plan. Do not take an unconfirmed deduction or use a discount calculation as a substitute for financing and tax review.
- Contact the supplier before the problem. Explain the actual invoice, proposed payment dates and requested change through the authorized account contact. State forecasts as forecasts and avoid promises you cannot support. Keep the supplier's response, conditions and revised dates; until an actual change is agreed, the existing terms remain the planning basis.
Assign someone to reconcile statements, invoices, releases and payments so disputes and approaching limits are visible. Keep statutory payment, lien or holdback questions with advisers familiar with the actual jurisdiction and contract; a payment calendar alone does not protect those rights. If the account position deteriorates, update the company cash forecast and affected ordering plan promptly instead of waiting for the next rejected order.
Common mistakes
- Assuming customer lateness changes supplier obligations.
- Counting a claim forecast as cash in the bank.
- Applying a discount or revised date without its actual agreed conditions.
Checklist
Review the supplier account
- Actual invoice and due-date basis.
- Limit and pending-release exposure.
- Receipt forecast and late-payment scenario.
- Reviewed funding and discount options.
- Recorded supplier response and affected orders.
Check your understanding
The supplier extends terms to day 45 and you forecast receipt on day 55. Is the cash problem resolved?
