Ways to Leverage Payment Terms for Better Deals

Paying invoices early sounds smart until it isn’t. Here’s why. My client Sarah was proud of how fast she paid.  But later turns out, she was literally throwing money away. Sarah’s manufacturing company had fantastic vendor relationships. Everyone loved doing business with them. Yet, cash flow was tight. Revenue kept growing, but working capital kept shrinking. So, I dug into her payment data from the last quarter. They paid $250K to vendors on 30-day terms. The average payment time? Just 6 days. Meaning she sacrificed 24 days of free money. At a 6% annual interest rate, those 24 days cost her $1,000 a month. Over a year? That’s $12,000 lost - money that could’ve fueled growth, stocked inventory, or padded emergency reserves. But wait, it gets worse. While Sarah was being the “perfect client,” her own customers dragged their feet—taking 45 days to pay her. She was unknowingly funding everyone else’s business, strangling her own cash flow. I sat down with Sarah and her team, and we revamped their payment strategy. Net 30 terms? Pay on day 28. Net 15 terms? Day 13. Early payment discounts? Only if they beat our cost of capital. Within just 60 days, they unlocked an extra $80K in working capital. No loans. No credit lines. Just smarter cash management. Best part? Vendors still loved Sarah. Her business finally had breathing room. The cash flow stress disappeared almost overnight. Yes, vendor relationships matter. But your business survival matters more. Use your payment terms fully. Let your cash work as hard as you do. If you found this valuable, follow Gary Jain for more insights like this. #accountspayable  #finance  #accounting 

Unlocking Revenue Growth: How In-House Lawyers Can Drive Cash Flow with Contracts Traditionally, in-house legal teams are seen as cost centers—essential for risk management but not necessarily revenue generators. But what if I told you that your contracts could be a powerful tool for increasing cash flow and accelerating revenue? By strategically managing accounts receivable (AR) and accounts payable (AP) through contract terms, in-house lawyers can directly impact the company’s bottom line. Here’s how: 1. Faster Payments = More Cash on Hand 🔹 Tighten Payment Terms – Reduce standard net-60 or net-90 terms to net-30 (or even shorter where possible). 🔹 Enforce Late Payment Penalties – Ensure contracts have interest clauses for overdue invoices. 🔹 Define Clear Invoicing Processes – Ambiguity leads to disputes and delays—spell out invoicing requirements clearly. 2. Smart Payables = Improved Cash Flow 🔹 Negotiate Extended Payment Terms – Secure longer payment periods with suppliers to optimize working capital. 🔹 Early Payment Discounts – Structure contracts to allow strategic early payments for discounts, balancing cash flow needs. 🔹 Automate Payment Triggers – Use contract automation to ensure payments align with revenue inflows. 3. Mitigate Revenue Leakage & Strengthen Collections 🔹 Audit Payment Compliance – Ensure customers stick to agreed payment terms through regular AR reviews. 🔹 Strengthen Termination & Default Clauses – Protect against non-payment scenarios with strong legal protections. 🔹 Align with Finance – Work closely with finance teams to review contractual obligations affecting cash flow. Key Takeaway Contracts aren’t just risk management tools—they’re levers for revenue growth and financial efficiency. In-house lawyers who master this shift from cost center to value creator, proving legal’s role as a strategic business driver. What’s one way your legal team has improved cash flow or revenue through contracts? Let’s discuss! ⬇️

🚨 The Hidden Cost of Getting Paid Faster 💰 Cash flow is one of the biggest challenges in manufacturing ⚙️. You need it for materials 🏗️…for labor 👷…overhead...for everything. But your customers? They need it too. They stretch payments 60, 90, even 120 days ⏳💸. So what do many shops do? They give early payment discounts…1%, 1.5%, maybe even 2% to get paid in 10-15 days 💰📅. Seems like a fair trade-off, right? 🚫 Not so fast. If you're offering 1% 10, Net 30, that’s an implied cost of nearly 20% annually 📉❗. 📊 Use this simple formula: Annualized Discount Rate = [Discount % / (100% - Discount %)] × [365 / (Full Payment Days - Discount Days)] Now, compare that to borrowing from your bank 🏦. Even today, a good line of credit might cost you 8%. That’s a huge gap. Why give up 20% when you could finance short-term cash needs for 8%? 🤔 But not ALL terms are bad! Net 60, 1% 15 days is 8.2%...I can work with that! Important thing is to know the math and use it wisely! If you have bad terms, what do you do? Probably dictated by customer anyway. 🤷 🔥 3 Possible Ways to Fix This: ✅ Secure Low-Rate Capital from Your Bank. Need cash faster? A business line of credit at 7-9% is way cheaper than a 20% effective discount rate.💵 ✅ Include Financing Costs in Your Pricing. If customers push payments, bake the cost into your part price so you’re not the one taking the hit.💲 ✅ Negotiate Better Payment Terms. If they insist on Net 60, 90 or worse push back. Explain the cost of that to your business. 🤝 🚀 Bottom Line: Don’t blindly accept early payment discounts without running the numbers. Protect your margins. Protect your cash flow. 💡📈 How do you handle payment terms in your business? Drop a comment below! 👇💬 #BuyTheNumbers #CashFlowMatters #ManufacturingFinance #NumbersMatter #DataDrivenDecisions #GrowingValue #MFGLeader #MakingChips Buy the Numbers# MakingChips MakingSparks Machine Shop Mastery Lights Out Nick Goellner Paul Van Metre Matthew Nix Casey Voelker Jennifer Dubose Kaleb Mertz