Customer Wants 60-Day Payment Terms but Suppliers Need Payment First: How to Fund Year-End Orders

TL;DR: If your customer wants 60-day payment terms but suppliers require upfront payment, the main issue is the cash flow timing gap between taking the order and collecting payment. Before arranging short-term working capital, map every payment point—from deposit and purchasing to labour, delivery and final collection—to calculate the actual funding gap.

A confirmed year-end order can increase revenue while creating immediate cash pressure. The business may need to pay suppliers and workers weeks before receiving the customer's money, so the first step is to understand exactly when cash goes out and when it comes back.

Start With an Order-to-Cash Timeline

Take one confirmed order and map its entire cash cycle.

For example, assume you receive a RM200,000 order:

Day 0: Customer confirms order
Day 7: RM80,000 supplier payment required
Day 15–30: RM30,000 production and labour costs
Day 35: Goods delivered
Day 95: Customer pays, based on 60-day terms

In this example, the company has to fund at least RM110,000 of major costs before collecting the customer's payment.

The important question is therefore not only “Is this a profitable order?” but also “Can the business finance the order until the cash arrives?”

Mark Every Cash Outflow Before Delivery

Next, list all costs that must be paid before you receive the customer's final payment.

These may include supplier deposits, raw materials, inventory purchases, wages, subcontractor charges, logistics and other delivery-related expenses.

This gives you a clearer picture of the order's peak cash requirement.

A RM200,000 order does not necessarily require RM200,000 of financing. If the customer pays a deposit and some suppliers provide credit terms, the actual funding gap may be much smaller.

Can You Request a Customer Deposit?

Before using external financing, consider whether the payment structure can be adjusted.

For example, instead of giving the customer 60-day terms on the full amount, could the arrangement include a 20% or 30% deposit when the order is confirmed?

A RM200,000 order with a 30% deposit would bring RM60,000 into the business earlier.

That cash could help cover purchasing or production costs and reduce the amount the company needs to fund itself.

Can You Use Progress Payments?

For larger or longer projects, another option is milestone or progress billing.

Instead of collecting almost everything after delivery, payment could potentially be divided according to agreed stages—for example, deposit, production milestone, delivery and final payment.

The exact structure depends on the commercial agreement, but the principle is straightforward:

The closer customer collections are to your actual expenses, the smaller the cash flow gap becomes.

Can Suppliers Offer Payment Terms?

The other side of the equation is supplier payment.

If a supplier currently requires full payment upfront, ask whether part of the purchase can be placed on 30-day or 60-day terms, particularly when there is an established purchasing relationship.

Even partial supplier credit can change the cash requirement significantly.

Instead of immediately financing the full purchasing cost, first compare customer deposits, progress payments and supplier terms.

Calculate the Remaining Funding Gap

After adjusting the available payment terms, calculate what is still missing.

For example, your pre-collection costs are RM110,000. The customer provides a RM40,000 deposit, while supplier terms delay another RM30,000 payment.

Your remaining short-term cash requirement may therefore be around RM40,000 rather than RM110,000.

This is the number that becomes relevant when evaluating a short-term working capital arrangement.

FAQ

Why can a confirmed order create cash flow problems?

Because the business may need to pay suppliers, employees and other costs before the customer pays. The order can be profitable while still creating a temporary cash flow gap.

Should I finance the full value of the order?

Not necessarily. Calculate the expenses that must be paid before customer collections, then deduct deposits, progress payments and available supplier credit.

Can customer deposits reduce working capital needs?

Yes. An upfront deposit brings part of the order value into the business earlier and can be used to support purchasing, production and delivery costs.

What information should I prepare before discussing short-term funding?

Prepare the order amount, customer payment schedule, supplier payment terms, expected expenses, delivery date and expected collection date. This makes it easier to calculate the actual short-term funding requirement.

Conclusion

In summary, when customers want 60-day terms but suppliers require payment first, the key issue is the timing gap between cash going out and cash coming back.

Map the order from confirmation to collection, explore customer deposits, progress payments and supplier terms, then calculate the remaining gap. Provide the order value, payment milestones and delivery arrangement when discussing your short-term working capital needs.