Why supplier terms matter so much
Every day of credit a supplier gives you is a day of funding you don’t need from anywhere else. If your business buys $50,000 of stock a month and moves from 7-day to 20th-of-the-month-following terms, you’ve effectively freed up weeks of cash — without borrowing anything.
For seasonal and stock-heavy businesses, supplier terms are often the cheapest working capital available.
Know what “normal” looks like
In New Zealand business-to-business trade, the most common terms are:
- 20th of the month following — invoices dated any time in March are due on 20 April.
- 7 or 14 days — common for smaller suppliers and new accounts.
- Cash on delivery or payment before dispatch — for new customers or overseas suppliers.
- Deposit plus balance on shipping — standard for many imported goods.
Knowing the norm in your industry tells you what you can reasonably ask for.
Before you ask: get your house in order
Suppliers extend credit to customers they trust. Before you negotiate:
- Pay on time for three to six months. Nothing strengthens your case more.
- Know your numbers. How much have you bought from them in the last year? What’s the forecast?
- Understand their position. A small local supplier has less room than a large distributor.
- Decide what you want. Longer terms? Seasonal terms? A discount? Stage payments?
Five things to ask for
1. Longer standard terms
“We’ve paid every invoice on time for the past year and our orders have grown. Could we move from 14-day terms to the 20th of the month following?”
2. Seasonal terms
For seasonal businesses, ask for terms that match your cash cycle. A garden centre might ask a nursery supplier for spring stock to be invoiced in September but due in November, once spring sales are flowing. Some suppliers call these “dating” terms.
3. Staged payments
On a large order, ask to pay in instalments — a third on order, a third on delivery, a third 30 days later.
4. An early-payment discount
If you have access to cash or a facility, ask what discount they’d offer for payment within seven days, or on order.
5. A higher credit limit
As your orders grow, ask for a credit limit that allows you to place larger orders without waiting for earlier invoices to clear.
What you can offer in return
Negotiation works best when both sides gain:
- Volume commitments — a larger order or a committed annual spend.
- Forecasts — sharing your order forecast helps suppliers plan production.
- Exclusivity or preferred-supplier status in a category.
- Faster payment on some lines in exchange for longer terms on others.
- Reliability — the simple promise that every invoice will be paid on the agreed date.
The early-payment discount sum
Whether to take an early-payment discount comes down to one comparison: is the discount worth more than it costs to fund the early payment?
Example scenario — illustrative only. A Christchurch hardware wholesaler is offered a discount of 2.5% for paying a $40,000 invoice on order instead of on 20th-following terms (about 45 days later). The discount is worth $1,000. If funding the $40,000 for 45 days costs meaningfully less than $1,000 — your lending specialist can tell you the actual cost — taking the discount leaves the business ahead.
Run the numbers each time. A discount that makes sense on one invoice may not on another.
When the answer is no
Sometimes suppliers can’t move, particularly overseas manufacturers with tight margins of their own. In that case:
- Ask again after a few more reliable orders.
- Look at splitting orders to reduce the upfront amount.
- Consider whether a funding facility can bridge the gap. A revolving line of credit can pay suppliers upfront and be repaid as stock sells.
Negotiating with overseas suppliers
Importers face a particular challenge: many overseas manufacturers ask new customers for full payment before goods ship. Terms can improve over time:
- Start with a deposit structure. A common progression is from full payment upfront to a deposit on order with the balance on shipping.
- Move the balance later. After several reliable orders, ask for the balance to be paid on arrival or a set number of days after the bill of lading.
- Consider trade finance instruments for larger orders, which your bank or a trade finance provider can explain.
- Mind the exchange rate. Payment timing affects how much you pay in New Zealand dollars. Your bank can explain options for managing currency risk.
Building a relationship through regular video calls or a visit can make a real difference to how much flexibility a supplier will offer.
Put agreements in writing
Once terms are agreed, confirm them by email and make sure they appear on invoices and in your accounting software. Terms that live only in someone’s memory tend to disappear when staff change.
How funding complements good terms
Good terms shorten the gap; funding covers what’s left. A business with 20th-following terms from suppliers but 60-day terms from its biggest customer still has a gap. A business line of credit covers it for businesses usually trading six months or more. And if a bulk-buy discount is too good to miss, see opportunity funding.