Case Study: Working Capital Optimisation Through Supplier Terms

Client Overview

Client Type: Established B2B-focused business

Order Profile: Mix of standard and large-value orders

Cost of Goods Exposure: High, including orders approaching seven figures

Primary Risk: Paying suppliers well before being able to invoice customers

The business was operationally strong but cash flow was under pressure. Large orders required significant upfront capital, and the gap between supplier payment and customer invoicing was creating unnecessary financial strain.

The Challenge

During initial scoping, discussions with the accounts team revealed that supplier terms had not been actively reviewed or renegotiated for years. There were no clear rules governing when ownership transferred, when deposits were required, or how cash exposure was managed.

Outdated Supplier Terms

Supplier payment terms were largely static—unchanged for years. Standard terms of 60–68 days had never been challenged. No one had asked for better. The terms were accepted as fixed when they were actually negotiable.

Deposit Requirements Draining Cash

Many suppliers required upfront deposits to fund production runs. This meant cash was going out the door well before goods were even manufactured, let alone delivered or invoiced. On large orders, this created significant cash exposure.

Ownership Transferring Too Early

Ownership of goods was transferring at production completion rather than pickup. This meant the business was financially liable for inventory sitting in supplier warehouses—inventory they had not yet received, could not sell, and could not invoice.

Cash Conversion Cycle Too Long

The gap between paying suppliers and invoicing customers was too long. For large orders, this gap often required trade loans or significant internal cash reserves. Financing costs eroded margins. Financial stress on the business owner was constant.

Before: The Situation

The Solution

The engagement addressed working capital from both sides: supplier terms and customer terms. The goal was to shorten the cash conversion cycle by extending supplier payment windows and accelerating customer payment timing.

Phase 1: Supplier Relationship and Brand Positioning

Supplier negotiations work best when the client is positioned as a strong, reliable partner. Before any commercial discussions, we established the foundation.

• Reviewed how the client was presenting themselves to suppliers
• Implemented a framework for consistent, professional supplier engagement
• Positioned the client as a growing, long-term partner rather than a transactional buyer

Strong positioning and trust unlock flexibility that pure negotiation cannot.

Phase 2: Supplier Term Renegotiation

With the foundation in place, direct discussions were held with key suppliers.

• Renegotiated payment terms from 60–68 days to 90 days
• Aligned extended terms with changes in shipping strategy (including sea freight)
• Reduced the gap between supplier payment and customer invoicing

This alone delivered meaningful working capital improvement—an extra 22–30 days to pay.

Phase 3: Deposit Reduction and Removal

Many suppliers were previously requiring deposits to fund production runs. Through negotiation:

• Deposits were reduced or completely removed
• In several cases, cash outlay was delayed by 60 days or more
• Suppliers agreed to invoice only once goods were picked up by the freight forwarder

This removed the need to put cash upfront for inventory.

Phase 4: Ownership Transfer Rule Changes (Supplier Side)

Ownership rules were restructured to reduce financial and operational risk.

• Ownership transferred later in the process—at pickup, not production completion
• Financial liability aligned more closely with physical movement of goods
• Invoicing triggered by pickup rather than production completion

Phase 5: Ownership and Payment Rule Changes (Customer Side)

The same discipline was applied downstream to customers, particularly for large B2B and government orders.

• Sales frameworks updated to include ownership transfer clauses
• Earlier invoicing points negotiated where possible
• For some large orders, invoicing timing improved by up to 45 days
• Partial upfront payments introduced on selected projects

In one example, upfront payments were received 90+ days before goods delivery, creating immediate positive cash flow.

Results

Financial Impact

• Significant improvement in cash flow across the business
• Removal of the need for trade loans on large orders
• Reduced margin erosion caused by financing costs
• Improved ability to fund large cost-of-goods commitments internally

Some individual orders involved cost-of-goods values approaching seven figures—now manageable without external finance.

Operational Impact

• Reduced financial stress on the business owner
• Smoother operational planning and execution
• Supplier and customer terms became part of standard workflows
• Cash flow management embedded into the sales cycle rather than treated as an exception

Key Takeaways

1. Working capital is often hidden in commercial terms. Improving supplier and customer terms can deliver more impact than increasing revenue. The cash is already there—you just need to change when it moves.
2. Supplier relationships enable better outcomes. Strong positioning and trust unlock flexibility that pure negotiation cannot. Before asking for better terms, ensure suppliers see you as a valuable long-term partner.
3. Ownership timing matters as much as payment timing. Changing when ownership transfers can dramatically reduce cash exposure. Financial liability should align with physical movement of goods.
4. Cash flow rules must be operationalised. Embedding these principles into sales and procurement workflows ensures they persist. Working capital is not a finance-only exercise—it is a commercial system.