In the example on page one, cash leaves an average of 54.5 days before the goods arrive. Terms are negotiable, and most brands accept whatever they were quoted when they were small and never ask again.

What to ask for, in order of value

1. A smaller depositMoving from 30% to 20% on a deposit paid 100 days before arrival, with the balance still paid at shipment, cuts 6.5 days from the weighted cycle in the tool in chapter 3. Offer to pay the deposit on materials only.
2. Balance on arrival instead of at shipmentMoves 70% of the order by the transit time: 24.5 days off the cycle on the defaults.
3. Net terms after arrivalNet 30 from arrival, the goal for an established relationship, cuts 45.5 days on the defaults.
4. Scheduled releases on a volume commitmentFrom the last chapter: the bigger order’s price, delivered and paid in parts.
5. Consignment on slow moversThe supplier owns stock in your warehouse until it sells. Rare, but free to ask.

DerivedFrom the cycle tool’s defaults: 30% deposit 100 days before arrival, 70% balance 35 days before arrival.

What to offer in return

A supplier gives better terms to a customer who makes its life predictable: a rolling six-month forecast with the next two months firm, a record of paying on the due date, a volume commitment with releases, or a second product line.

When to pay early

Terms work in both directions. Costco’s filing says it sells inventory before it has to pay “even while taking advantage of early payment discounts” Filed. A common early-payment offer is 2% off for paying in 10 days instead of 30. Giving up 2% to keep your cash 20 more days is equivalent to borrowing at about 37% a year Derived. If you have the cash, take the discount. If you’d have to borrow to take it, compare the rate.

Don’t stretch

Remember the payables result from chapter 2: Deloof found that less profitable firms paid their bills later, not that paying later made firms profitable Published. Paying late without agreement is borrowing without asking. It costs you production priority, the next negotiation, and sometimes the supplier.

Negotiate the terms. Then pay on the day, every time. That record is the next negotiation.

Do this

• Send the terms request in Appendix B to your two largest suppliers this month, with a rolling forecast attached. Ask for one change each, the highest on the list above that you think they’d grant, and offer something from the second list in return.