You Won the Order. Can Your Business Afford to Deliver It?

A customer can place a R150,000 order and still leave a small business struggling to pay its suppliers. The problem often starts with the payment terms. A construction company orders 500 sets of workwear from a small supplier. The quote is accepted, the quantities are confirmed and the customer gives the supplier a delivery date. The supplier now has to find R72,000 for fabric and materials. There are production wages to cover, packaging to buy and transport to arrange. The customer has given the business 30 days after delivery to pay the invoice.

For the supplier, that creates a cash problem before a single uniform has been delivered. The order is worth R150,000, but none of that money is available yet. The business must use its own cash to get the work done, even though it is supplying goods to a customer who has already committed to buying them. This is particularly difficult for small businesses supplying large retailers, construction companies, mines and government departments. They may win contracts that are much bigger than their usual monthly sales, but the customer's payment cycle does not change the dates on which their own bills must be paid.

The numbers behind the order

Let's look at the workwear supplier.

It charges R300 for each set of uniforms. For 500 sets, the customer will pay R150,000.

The supplier estimates the following costs:

There is R45,000 left after these direct costs, before overheads, tax and other expenses. That looks like a reasonable job. But the supplier needs R105,000 before it can invoice the customer for the completed order. If the business has R40,000 available, it has a R65,000 shortfall. It must find that money somewhere, negotiate different payment terms or reconsider whether it can take on the order. This calculation should happen before the business accepts the job, not when the supplier starts asking for payment.

Ask the customer to carry some of the upfront cost

The first conversation should be about how the order will be paid for. A 50% deposit on the R150,000 order would bring in R75,000. That leaves the supplier with R30,000 still to fund towards the estimated R105,000 cost. The business could also propose a payment arrangement linked to the work:

The supplier would receive R135,000 before the uniforms leave its premises. It would only have R15,000 outstanding after delivery. Not every customer will agree to this. Larger organisations often have fixed procurement and payment procedures. But it is worth asking whether they can pay a deposit, cover the cost of materials or release payment when a particular stage of the work is completed. Other arrangements may include cash on delivery or credit terms of 7, 30 or 60 days. The business needs to understand what each arrangement means for its cash position.

What to say when the customer insists on 30-day terms

A small supplier may be reluctant to question a customer's payment conditions, particularly when it wants to secure the contract. But asking for a different arrangement is not unreasonable. The supplier is taking on costs to fulfil the order and needs to explain how those costs will be covered.

A conversation could go something like this:

“We have reviewed the order and can meet the delivery requirements. The materials need to be paid for before production starts. Could we arrange a deposit to cover the initial purchase, with the remaining payments linked to production and delivery? We can provide the cost breakdown and proposed payment dates for your approval.”

If the customer cannot pay a deposit, ask whether it can pay the material supplier directly or approve an earlier payment against a production milestone. Whatever is agreed should appear in the purchase order or contract. The supplier should also confirm who approves invoices, what supporting documents are required and when the payment period starts. An invoice can be submitted on time and still be delayed because a delivery note or approval is missing.

A late payment can affect the next order

The workwear supplier completes the job and sends its invoice. The customer is now responsible for paying R150,000. While waiting, another customer places an order. The supplier must decide whether it has enough money to buy more materials and pay the production team.

This is where unpaid invoices start affecting everyday operations. Money spent on one job cannot be used for the next one until the customer pays. A business should review its outstanding invoices every week. It does not need an expensive accounting system to do this. A spreadsheet can show who owes money, how much is outstanding and how late the payment is.

For example:

The owner or person responsible for accounts should contact customers with overdue invoices, check whether there are any disputes and record promised payment dates. It is also worth checking whether the customer has received the invoice and whether it has been approved for payment. Sometimes the delay is caused by missing paperwork rather than a refusal to pay. The important thing is to know which payments are outstanding before the business runs short of cash.

When another order should be put on hold

Consider a customer who already owes the supplier R60,000 and now wants another R40,000 order on credit. Accepting the new order would take the customer's outstanding balance to R100,000. The supplier may be reluctant to turn down the work, but it needs to consider how much more money it can afford to put into that account. A practical rule is to place an account on credit hold when an invoice is more than 14 days overdue. No additional credit orders should be accepted and no further goods should be dispatched until the overdue amount is paid or management approves a written repayment arrangement.

The customer should be contacted and told why the account is on hold. Before stopping an existing delivery or contract, check the terms already agreed. A business should not create a separate contractual problem while trying to deal with an unpaid invoice. It should also look at the customer's payment history. If the same account is late every month, the business may need to reduce its credit limit, ask for deposits or insist on payment before taking on more work.

Two figures to keep an eye on

For the next month, record two things that will show how much pressure customer payment terms are putting on the business.

Customer payment days

Work out how long customers actually take to pay. Compare that with the agreed terms. If you invoice on 1 December, expect payment within 30 days but only receive it on 20 January, the customer has taken 50 days. Do this across your customer accounts to see whether late payment is becoming a regular problem.

Cash committed to unpaid orders

Add up the money already spent on jobs for which the customer has not paid. Include materials, wages, transport and other direct costs. This is different from simply looking at the total value of unpaid invoices. It shows how much of the business's own money is tied up in work that has already been done or is still being completed.

What often gets overlooked

Small businesses sometimes price a job carefully but give little attention to how it will be financed. They may forget to include transport costs, agree to buy all the materials upfront or accept 60-day terms without checking whether they can cover two months of expenses. Another common mistake is taking on a second large order while the first customer has not paid. The business then has two jobs to finance instead of one. Before confirming a contract, check the cost of the work, the dates when suppliers and workers must be paid, the customer's payment terms and the cash available to cover the gap. A R150,000 order can be good business. But if it requires R105,000 upfront and the customer only pays after 30 days, the supplier needs a plan for that R105,000.