Supply Chain

Supplier Payment Terms

The 30/70 structure everyone quotes hides the real negotiation — WHEN the 70 moves — and paying the balance after inspection passes is the cheapest quality lever most importers never pull.

  • Beginner
  • 6 min total
  • 10 chapters

What decision this helps you make: Your balance trigger (production? inspection? documents? arrival?), your graduation path toward net terms, and which protection instrument your order size warrants.

What this topic is

Supplier payment terms decide who pays when along the production timeline: deposit-plus-balance structures where the balance's trigger is the real negotiation, graduating with trust toward net terms — supplier-financed working capital.

Why it matters

Terms are the cash-conversion cycle's upstream half — every day between paying suppliers and collecting from customers is financed by you — and payment timing doubles as quality leverage: disputes negotiate better while the balance is unpaid.

Who should learn it

Anyone paying factories — from first escrowed orders to net-terms relationships.

What you will understand

  • The deposit/balance anatomy — and why the balance trigger is the negotiation
  • Balance-against-inspection: payment timing as quality leverage
  • The graduation path: escrow → deposit/balance → net terms
  • Terms as working capital: what each day of timing is worth

Prerequisites

Common misconception

"Payment terms are set — 30/70 is just how factories work." The 30/70 SPLIT is common; everything else is negotiated: what triggers the 70 (before production ends? after inspection passes? against shipping documents? after arrival?), each step moving real risk between parties — and the whole structure graduates with relationship history toward net terms, which are supplier-financed working capital at a price (free) no bank will match. Importers who treat terms as fixed are leaving both leverage and financing on the table.