Inform
5 min read
Cash Flow and Supplier Payment Terms: The Negotiation Move Most Australian SMBs Miss
Sylvia Luchian
CEO & Founder
Big businesses in Australia are taking more than double their agreed payment terms to pay their small business suppliers. The Payment Times Reporting Regulator confirmed in early 2026 that the 95th percentile payment time worsened to 64 days in the first half of 2025, up from 58 days in the prior period, even though the average agreed payment term was just 29 days.1 The slowest payers are getting slower.
Most small business owners hear this and think about chasing invoices harder. The procurement response is different. If your customers are paying you late, the immediate lever is the terms on which you pay your own suppliers. Your supplier payment terms are a cash flow tool. Most Australian SMBs have never treated them that way.
One in six Australian SMEs now loses more than $2,500 per month to late payments from customers.2 The Payment Times Reporting Regulator reports that the slowest big business payers are taking more than 64 days to pay invoices agreed at 29-day terms.3 That is a gap of more than a month between what was contracted and what actually happens in practice.
For small businesses on the other side of that equation, as customers rather than suppliers, the dynamic is reversed. The ASBFEO has noted that only around one in four big businesses in retail paid their small business suppliers within 30 days, and in manufacturing the figure drops to just 15 per cent.4
This creates an ongoing cash flow problem for any SMB that supplies to large organisations and itself buys goods or services on short payment terms. Money goes out faster than it comes in. The gap between the two is where cash flow crises live.5
Key Takeaway: Late payment from customers is largely outside your control. The payment terms on which you pay your own suppliers are within it. That is where the negotiation opportunity sits.
Most small business owners think of payment terms as an accounts function. The invoice goes out, the terms are printed at the bottom, and the follow-up begins when the due date passes. That is the wrong frame.6
Payment terms are a procurement decision on both sides of the transaction. When you are the buyer, the terms on which you pay your suppliers directly affect your cash position. Extending payment terms from 14 days to 30 days on a $50,000 monthly supplier account effectively frees up $50,000 in working capital for an additional fortnight. That is not an accounting change. That is a cash flow improvement produced by a single negotiation.
When you are the seller, the terms on which you invoice your customers define how long you are effectively financing their operations at no cost to them. Understanding both sides of this equation is what separates businesses that manage cash flow from businesses that react to it.
Key Takeaway: Supplier payment terms are not a billing detail. They are a working capital decision. Treat them as one.
The most common approach to supplier payment terms in small business is to accept whatever the supplier proposes and then pay it when cash allows. This is not a real strategy.
Payment terms are most negotiable at the point of engagement, before the commercial relationship has been established and before the supplier has come to expect a particular arrangement. Once terms are embedded in a contract and the relationship is running, changing them requires a renegotiation that carries some risk to the relationship.7
When entering any new supplier relationship, make payment terms an explicit part of the discussion. Ask what standard terms look like and what flexibility exists. Even a supplier who quotes 14-day terms as standard may have room to move to 30 days for a reliable customer with predictable order volumes.
Suppliers extend payment terms because doing so has a value to them that outweighs the cost of waiting. That value might be volume commitment, contract certainty, prompt payment consistency, or the avoidance of a customer relationship disruption.8
When asking for extended terms, frame the conversation around what you can offer in exchange. A commitment to pay on the exact due date every time, without exception, is worth more to a supplier than a customer who pays quickly on average but inconsistently in practice. Consistent, reliable payment on 30-day terms is often preferable to erratic payment on 14-day terms.
Price and payment terms are two different levers. Negotiating them simultaneously tends to produce compromises on both that leave neither party satisfied. Establish the price first, then open the payment terms discussion as a separate matter. This framing makes the conversation feel less like a squeeze and more like a structural arrangement that suits both parties.
Some suppliers offer early payment discounts: a small percentage reduction on the invoice in exchange for payment within a shorter timeframe, typically seven to ten days instead of 30.9
For suppliers who offer this, run the calculation. A 2 per cent discount for payment within 7 days on a 30-day invoice is equivalent to a yearly return of approximately 37 per cent on the cash used. If you have the cash available and the relationship is stable, early payment discounts can be a high-return use of working capital. If cash is tight, extended terms are worth more than the discount.
Key Takeaway: Negotiate terms before you sign. Offer something in exchange. Separate the price from the terms conversation. Always run the maths on early payment discounts before accepting or declining them.
The Australian Government's Payment Times Reporting Scheme requires large businesses with annual revenue above $100 million to report their payment terms and actual payment performance twice a year. That data is open to the public.10
Before entering a commercial relationship with a large business as a supplier, look them up. The register will tell you what payment terms they offer small businesses, what percentage of invoices they actually pay within 30 days, and how they compare to peers in their sector.
A business that contracts at 30 days but pays at 60 is telling you something about how they run their payment process. That information belongs in your business decision-making, not discovered after the fact when you are chasing a late payment.
Key Takeaway: The Payment Times Register is a free, public tool. Use it before you supply to any large business. Know what their actual payment performance looks like before you agree to terms.
The most effective cash flow management approach to payment terms is to map the gap between what you receive and what you owe, across all of your major business relationships simultaneously.11
List your major customers and the average days between invoice and actual receipt. List your major suppliers and the payment terms in effect. The difference between the two is your working capital gap. If customers pay you in 45 days on average and you pay suppliers in 14 days, you are financing a 31-day working capital gap out of your own cash reserves. That gap is the negotiation target.
Closing that gap doesn’t require winning every negotiation. Moving two or three significant supplier relationships from 14-day to 30-day terms, or securing 45-day terms on your largest account, can produce a meaningful improvement in your cash position without a single new sale.12
Key Takeaway: Map the gap. Know how long it takes customers to pay you and how quickly you pay suppliers. The difference is your working capital exposure. Close the gap through negotiation, not through borrowing.
Payment terms are not the most glamorous part of commercial management. They sit in the background, rarely discussed, frequently assumed. But for a small business operating in an environment where large customers are consistently paying late and cash flow is the primary constraint on growth, they are one of the highest-leverage negotiation moves available.
The businesses that treat payment terms as a procurement decision, negotiated carefully at the point of engagement and checked regularly, carry less cash flow risk, access more working capital, and less time spent dealing with payment pressure. The businesses that accept whatever terms they are offered and hope for the best tend to find out what that hope is worth during the quarter where everything goes wrong at once.
Structure before spending applies to payment terms as much as anything else in the buying process. Get the terms right before the work begins, and the cash flow becomes easier to manage.
If you want to review your supplier payment terms or work through the negotiation for a specific relationship, book a discovery call with D1 Advisory. No 47-slide deck. Just a straight conversation about your cash position and what the procurement levers look like from where you are sitting. You can reach us at www.d1advisory.business/book-a-call.
Before engaging any advisory firm, whether a large consultancy or a boutique specialist, ask four questions directly.
Whatever procurement model a business chooses, the person or firm providing procurement support should have no commercial relationship with any supplier the business is buying from or considering. Kickback arrangements between procurement advisors and preferred suppliers are a structural conflict of interest that directly harms the buyer.
Implementing probity in a small medium business doesn’t need a dedicated function or a complex framework that feels like death by paperwork. It needs four elements: a documented procurement policy, a conflict of interest register, a pre-defined evaluation criteria, and a record of decision.
