Techniques for Negotiating Payment Terms

When negotiating, do you think the big wins happen at the table? They don't! The real magic happens before the first word is spoken. Success in 80% of negotiations is due to preparation. It's taking small steps to control the process, foresee challenges, and set small goals. I coached a procurement manager stuck in a deadlock with a supplier. Both sides had drawn firm lines: • The supplier demanded upfront payments. • The procurement team refused. • They feared cash flow issues. For weeks, the talk had gone in circles. It made no progress. When I stepped in, I asked one question: “𝙒𝙝𝙖𝙩 𝙙𝙤𝙚𝙨 𝙩𝙝𝙚 𝙨𝙪𝙥𝙥𝙡𝙞𝙚𝙧 𝙧𝙚𝙖𝙡𝙡𝙮 𝙣𝙚𝙚𝙙?” The team realized the supplier's main concern wasn't money. It was to reduce delivery risks. By focusing on interests, not positions, we found a solution: 𝗔 𝘀𝗺𝗮𝗹𝗹 𝘂𝗽𝗳𝗿𝗼𝗻𝘁 𝗽𝗮𝘆𝗺𝗲𝗻𝘁, 𝗽𝗹𝘂𝘀 𝗺𝗶𝗹𝗲𝘀𝘁𝗼𝗻𝗲 𝗽𝗮𝘆𝗺𝗲𝗻𝘁𝘀 𝘁𝗶𝗲𝗱 𝘁𝗼 𝗱𝗲𝗹𝗶𝘃𝗲𝗿𝘆 𝗽𝗵𝗮𝘀𝗲𝘀. The result? The deal closed in two days, with terms that worked for both sides. That negotiation taught me this: →  Preparation isn't just logical. → It's also strategic and emotional. I'm happy to share here how I prepare for a negotiation: 𝗦𝗲𝘁 𝗦𝗠𝗔𝗥𝗧 𝗴𝗼𝗮𝗹𝘀 𝗳𝗼𝗿 𝗲𝘃𝗲𝗿𝘆 𝘀𝘁𝗮𝗴𝗲. • Be Specific, Measurable, Achievable, Relevant, and Time-bound. • No vague goals like “get the best deal,” aim for concrete outcomes: → Add a long-term partnership clause → Reduce delivery timelines by 10% → Secure flexible payment terms 𝗙𝗼𝗰𝘂𝘀 𝗼𝗻 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁𝘀, 𝗻𝗼𝘁 𝗽𝗼𝘀𝗶𝘁𝗶𝗼𝗻𝘀. • Ask, why does the other side want this? • When you negotiate based on interests, you create options that meet both parties’ needs. 𝗣𝗿𝗲𝘀𝗲𝗻𝘁 𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲 𝗼𝗳𝗳𝗲𝗿𝘀 (𝗠𝗘𝗦𝗢𝘀) • Successful comes with always having options ready. For example: → Offer A: A 5% discount for upfront payments. → Offer B: Standard payment terms and extended service coverage. If you present choices, you reduce deadlock and keep control of the conversation. 𝗨𝘀𝗲 𝗘𝗺𝗼𝘁𝗶𝗼𝗻𝗮𝗹 𝗜𝗻𝘁𝗲𝗹𝗹𝗶𝗴𝗲𝗻𝗰𝗲. 𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗶𝘀𝗻'𝘁 𝗷𝘂𝘀𝘁 𝗹𝗼𝗴𝗶𝗰—𝗶𝘁'𝘀 𝗮𝗯𝗼𝘂𝘁 𝗰𝗼𝗻𝗻𝗲𝗰𝘁𝗶𝗼𝗻. • Practice self-awareness to stay composed under pressure. • Show empathy to build trust. • Use "Feel, Felt, Found" on objections, and it'll guide decisions. Negotiation is like a dance. Both sides need to move in sync, adjusting their steps as they go, to create a harmonious outcome. And the best dances are choreographed long before the music starts. So, what’s been your biggest negotiation breakthrough? Have you ever unlocked a deal by shifting focus from demands to solutions? Found success by preparing better than your counterpart? Drop your story in the comments—I’d love to hear it. Or DM me if this resonates with a challenge you’re navigating. Let’s talk about what works.

One of the BIGGEST assumptions I see Web Designers and Developers make: - They believe payment terms are non-negotiable. - They think everything the client says has to be accepted. Just recently, I was on a call with Priya. She’s a web developer who helps big brands with landing pages. Her clients? Big brands with even bigger payment cycles - Net 60, Net 90, sometimes worse. The work was flowing in, but the cash? Barely trickling. Priya was: • Dipping into her savings to cover software subscriptions. • Struggling to pay her assistant. • Stressing over overdue invoices. One evening, after chasing yet another late payment, she’d had enough. She called me and said: “Why am I financing my client’s business? This doesn’t work for me.” On our call, I told her something that changed everything: "You know you can just ask for upfront payment, right?" Priya hesitated. Like most freelancers, she’d assumed pushing back on payment terms would scare clients away. But she decided to try anyway. The next time a client sent over their standard "Net 60" terms, Priya pushed back. Not aggressively. Not with ultimatums. She simply said: “I’d love to work with you. To ensure the project runs smoothly, I’d like to request 30% upfront and milestone-based payments every two weeks. Does that work for you?” The result? The client agreed - without hesitation. And just like that, Priya took control of her payment terms. But you know what's surprising? Priya’s initial approach isn’t uncommon. Most businesses accept client payment terms as non-negotiable because: • They think it’s “just how things are done.” • They’re afraid of coming across as difficult. • They assume pushing back will cost them the project. But here’s the reality: Payment terms are negotiable. And failing to negotiate can lead to: 1. Delayed payments that force you to cover costs out of pocket 2. You absorb all the risk - meaning, you are gambling on the client paying later 3. Net 60 or Net 90 terms leave you juggling finances or dipping into reserves. 4. You are overall sending the wrong message to the client Now there's 4 steps I suggest you take to fix this. Step 1 - Ask for Upfront Payments A 20–50% deposit is fair and protects you financially. Step 2 - Break Payments into Milestones Tie payments to project progress to avoid waiting until the end. Step 3 - Negotiate Shorter Payment Cycles Counter long terms with partial prepayments to bridge the gap. Step 4 - Be Professional, Not Demanding Frame your terms as a way to ensure a smooth project. Remember payment terms are not just random numbers, they’re the very foundation of your business. Negotiate. Set boundaries. Protect your business. Because a well-run business isn’t just about great work - it’s about getting paid fairly and on time. —— 📌 If you need my help with drafting custom contracts for your high-ticket projects, then DM me "Contract". #Startups #Founders #Contract #Law #Business

𝗗𝗿𝗮𝗳𝘁𝗶𝗻𝗴 𝗣𝗮𝘆𝗺𝗲𝗻𝘁 𝗖𝗹𝗮𝘂𝘀𝗲𝘀 A large number of disputes arise from vague payment terms. The following strategies should be taken care of while drafting payment clauses: • 𝗖𝗹𝗮𝗿𝗶𝘁𝘆 𝗶𝘀 𝗞𝗲𝘆: Specify the exact currency, payment method (bank transfer, cheque, etc.), and account details. Avoid ambiguity. • 𝗧𝗶𝗺𝗶𝗻𝗴 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Define precise payment deadlines. Use "within [number] days of invoice date" or "on or before [date]." For milestones, clearly link payment to completion. • 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿 𝗣𝗲𝗻𝗮𝗹𝘁𝗶𝗲𝘀: Include provisions for late payments, such as interest or late fees. This incentivizes timely payments. • 𝗔𝗱𝗱𝗿𝗲𝘀𝘀 𝗗𝗶𝘀𝗽𝘂𝘁𝗲𝘀: Outline a process for resolving payment disputes, including notice requirements and potential mediation or arbitration. • 𝗧𝗮𝘅 & 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀: Clarify who bears the burden of taxes, bank charges, and other related expenses. #contracts #agreements #law

I’ve started this week with overdue payments from two clients. At first glance, collections may sound like a finance team problem, but in reality, they have everything to do with growth. Why? Because cash flow discipline determines whether your business runs sustainably or stumbles despite great work. In India, delayed payments often have less to do with project scope or billing schedules and more to do with how clients prioritize their cash flow over yours. The question is: how do you safeguard your business without alienating relationships? A few lessons I’ve learnt the hard way: 1. Set expectations twice, not once Over a decade ago, a colleague and I went to collect a pending payment under ₹5 lakh. The client refused, claiming the service didn’t meet expectations. The real issue? The engagement letter had been signed by a Partner, who was absent until the deliverable was presented. The client assumed the Partner would be involved throughout. We eventually collected payment after three painful months. Lesson: confirm expectations when signing and again at project kickoff—don’t leave room for assumptions. 2. Contracts must be watertight—and reinforced Clients who overlook payment terms and insist you start projects “on goodwill” are often the ones who later argue over technicalities. Only strong contracts—and periodic reinforcement of those terms—work. Monthly billing can also de-risk project-based engagements. 3. Always know the escalation path In government and large enterprise contracts, relying on one single point of contact (SPOC) is risky. I’ve seen payments delayed by a year simply because the SPOC was evasive, and we didn’t know who else to approach. Mapping the escalation matrix upfront helps avoid these bottlenecks. And if, despite all this, a client still doesn’t pay? Then it’s not a client, it’s a liability. Pick clients who pay—even if the work is less glamorous. If you want “interesting work” at all costs, be ready for the possibility that it might also be unpaid work. Here’s the bigger truth: collections are also a strategy. The clients you choose, the terms you enforce, and the discipline you bring to cash flow management directly shape whether you grow sustainably or stumble despite great work. #BusinessGrowth #CashFlowManagement #ClientManagement #LeadershipInsights #GrowthIsDiscipline #CashFlowTruths

One of our clients came to us excited about a wholesale opportunity. A well-known stockist wanted to place a big order. It felt like a breakthrough. But when we looked at the terms, the numbers didn't add up. The stockist wanted: → 60-day payment terms → Sale or Return (so unsold stock would come back) → The right to discount without approval Here's what that actually meant: They'd need to fund production upfront. Wait two months to get paid. And risk getting stock back at the end of the season that they'd then have to shift themselves. All while the stockist could discount the product and erode the brand's pricing position elsewhere. The margin looked okay on paper. But the cash flow impact and the risk? It would have tied them up for months. We helped them push back. Not to kill the deal. But to renegotiate terms that actually worked: → 30-day payment terms instead of 60 → Outright purchase instead of Sale or Return → A minimum order quantity that made the admin worthwhile The stockist agreed. Because they wanted the product. And here's the thing: most stockists need independent brands more than the brands realise. Your job isn't to say yes to every opportunity. It's to make sure the ones you say yes to actually work for your business. 💬 Have you ever negotiated better terms than were first offered?

Clients not paying invoices in time is the number 1 agency killer in India. But nobody’s talking about it - we’ve accepted it as normal. In my first year, we had high paying clients - yet I’d have to pay expenses out of my savings sometimes. Last month, I saw an agency shut down because they couldn’t pay salaries and rent, with ₹20+ lakhs in unpaid invoices We never think it’s okay for employees to get their salaries late. So why is it okay for clients to not pay on time? As service providers, we need to speak up - and change our payment terms - to prevent this financial abuse. Here's what I do at my 8-fig agency to prevent these problems: 1. Make upfront payments a rule Charge 100% upfront for retainer clients. Bill at the beginning of the month, not end. 2. Split large projects into payment milestones Start (50%), Midway (30%), and Delivery (20%). No milestone paid? No next step. 3. Stop hourly billing Prioritise monthly retainer or project fees. Charge based on value provided, not time. 4. Build a ‘Cash Cushion’ fund 10% of revenue goes to a rainy day fund. 5. Automate follow-ups & invoicing Using Stripe, Razorpay, Refrens or a VA. Don’t let clients forget, keep nudging. - Also, pro tip - Build a personal brand. In a worst case scenario, you can expose a bad client on social media and get community support. Client should not avail our services unless they can pay for them. So let’s work together to stop this injustice. Feel free to repost if you resonate with this message. #clients #agency #business

How I Saved My Company $50,000 Using One Simple Negotiation Tactic As a procurement manager, I’ve been in my fair share of tough negotiations. But one deal stood out—a contract renewal where the supplier demanded a 15% price increase. I knew outright rejection wouldn’t work. The supplier was key to our operations, and switching would be costly. So, I took a different approach—shifting the focus from price to total cost. Digging Deeper: Finding Hidden Cost Drivers Instead of battling over unit price, I analyzed the total cost of doing business with them. Here’s what I uncovered: 🔍 Hidden Savings Opportunities: ✔️ We were paying high freight costs due to frequent small shipments. ✔️ Payment terms were fixed at 30 days—hurting our cash flow. ✔️ The contract included add-ons we never used. The Counteroffer That Changed Everything ✅ We proposed bulk shipments to lower logistics costs. ✅ We negotiated 45-day payment terms to ease cash flow. ✅ We removed unnecessary services and adjusted contract terms. 📉 The Result? 💰 $50,000 in cost savings—without switching suppliers. 🚀 A stronger relationship, as the supplier also benefited. 💡 Lesson: Negotiation isn’t about forcing a discount—it’s about optimizing value. The smartest deals aren’t always about the lowest price, but the best overall cost structure. 👉 What’s your most effective negotiation tactic? Let’s discuss in the comments! 👇 #Procurement #Negotiation #CostSavings #SupplyChain #WinWin

You are doing Payment Terms wrong. It’s not your fault. WACC (Weighted Average Cost of Capital) isn’t exactly a topic covered in procurement training. But every time you negotiate payment terms with a supplier, you’re making a financial decision. Without knowing WACC, you might be hurting your company more than helping it. What Is WACC? WACC is the average cost your company pays to get money. It’s a mix of: •Debt (loans, which have interest). •Equity (investors, who expect returns). •Think of it as the “price tag” on your company’s cash. Why Does This Matter in Payment Negotiations? When you negotiate payment terms, you’re directly affecting cash flow. For example: • Longer payment terms: Great for holding onto cash longer, but it costs you. Your WACC ticks away every day, making that delay more expensive. • Early payment discounts: They only make sense if the discount saves more than your WACC costs. And let’s not forget suppliers. They have their own WACC. If you force long terms, their financing costs rise, and they’ll quietly add that to your pricing. So, what seems like a “cost-saving” deal might actually cost you more. How Can You Negotiate Smarter? 1️⃣ Know Your WACC: Ask your finance team. Even a rough estimate is better than guessing. 2️⃣ Do the Maths: Compare early payment discounts to your WACC. If it’s cheaper, take it. 3️⃣ Think About Suppliers’ WACC: Push too hard on terms, and their extra costs could land back on you. WACC isn’t just a finance term—it’s a critical decision-making tool. Ignoring it in procurement could turn “savings” into costly mistakes. Next time you’re at the table, ask yourself: “What does this payment term do to my company’s cost of capital?” Does this perspective change how you think about supplier negotiations? What’s your approach to balancing payment terms with supplier relationships? ---------------------------------- 💡 Want more insights like this? Hit “Follow” for practical procurement strategies! #procurement #paymentterms #negotiation

PAYMENT TERMS in Procurement: Very Important matter when procuring!! Refer to the conditions under which a buyer agrees to pay a supplier for goods or services. These terms are crucial because they affect cash flow, supplier relationships, and financial planning for both parties. 🔑 Key Payment Terms in Procurement: 1. Payment Period:  o Specifies how long the buyer has to pay after receiving the invoice. o Common formats: Net 30, Net 60, etc.  e.g., Net 30 = Payment is due within 30 days of the invoice date. 2. Early Payment Discounts:  o Offers discounts for paying earlier than the due date. o Example: 2/10 Net 30 = 2% discount if paid within 10 days; otherwise, full payment due in 30 days. 3. Advance Payments: o Full or partial payment made before delivery. o Common in international or custom orders. 4. Milestone Payments/ Progress Payments: o Payments made at specific stages of project completion. (e.g., 30% upfront, 40% upon delivery, 30% after acceptance). Common in construction and large projects. 5. Payment Methods: o Letter of Credit (LC): A bank guarantees payment upon fulfillment of contract terms. o Bank Transfer (Wire Transfer, ACH): Direct electronic transfer of funds.  o Check or Cash on Delivery (COD): Payment made upon receipt of goods. o Credit Card/PayPal: Common for smaller transactions. 6. Late Payment Penalties: o Interest or fees are applied if payment is delayed beyond the agreed terms. 7. Retention Clauses: o A portion of payment (e.g., 5-10%) is withheld until project completion or a warranty period ends. (common in construction contracts). 8. Recurring Payments (Subscription Model): o Used for ongoing services (e.g., SaaS, maintenance contracts). 🧩 Factors Influencing Payment Terms: Supplier Relationship: Strong relationships may allow for extended terms. Industry Standards: Some industries have typical payment norms (e.g., construction often uses milestone payments). Buyer’s Cash Flow: Companies may negotiate longer terms to manage liquidity. Supplier’s Financial Stability: Suppliers may demand upfront payment if they have cash flow concerns. Economic Conditions: Inflation or financial instability may lead to stricter terms. 🧩 Why Payment Terms Matter For Buyers: > Manage cash flow > Build trust with suppliers > Negotiate better deals For Suppliers: > Ensure timely payments > Reduce credit risk > Plan production and inventory For Procurement Teams: > A strategic tool to strengthen supplier relationships and improve working capital. Best Practices for Negotiating Payment Terms: • Balance cash flow needs with supplier reliability. • Use early payment discounts if financially beneficial. • Ensure clarity in contracts to avoid disputes. • Consider supply chain risks when setting terms. • Align payment terms with internal cash flow cycles. Businesses must negotiate terms that balance their cash flow needs with supplier sustainability to maintain a resilient supply chain.

My actual New Year’s resolution is to put out more informative content. Let’s start with payment terms in a contract: 1) What is Payment Based on? Why are you paying? “Because they are doing work for me.” Sick, great response. I mean specifically, why are you cutting a check at that very moment? What triggered the need to pay (major project item, a time frame passed, job done, etc)? 2) Payment Structure There are many different ways that payment can be structured. Usually it’s dependent on the type of work (maybe someone is building software for you) and relationship of the parties (person or company is working with you on an ongoing basis). 3) Per Milestone/Project A common structure is payment per stage of a project (or just completion). Think construction: x% up front, x% once you hit some critical path item, and then finally x% when the job’s done. If this is what you’re doing, a clearly defined scope and understanding amongst the partiesis key. If the vendor/contractor gets paid after “kitchen repaired” and you thought that included appliance electrical work (and it doesn’t), it’s a payment dispute. 4) Quarterly/Monthly/Weekly Pay You could be paying for ongoing work that may end on a certain date in the future (or not). Think IT support for your company. Generally, you’re going to get an invoice on a certain day and have to pay within x calendar days (called Net X days). Timing of payment is important here. Can you pay within 15 calendar days (Net 15) of the date of an invoice? Maybe your company does check runs twice a month so that’s fine. Maybe that’s too fast for your accounts payable folks (or you). 5) Bespoke Payment Sometimes payment terms are unique and based on the industry/type of service or product. Like paying a base subscription fee (monthly payment) and an amount in additional once a certain amount of data has been used (milestone). 6) General Considerations A) Make sure there is a mechanism in place to handle disputed payments (like the kitchen example) (if you can hold that payment and pay whatever isn’t in dispute). B) If you’re the vendor, collection language is important (interest + fees). C) What happens to payments made upfront? Is it a deposit? If so, what happens to it? (Applied at the beginning? The end? Returned if work isn’t performed?) D) Can you off-set what you owe by how much you paid to fix the work the vendor did? E) What if we terminate the agreement? Consider language that clearly defines exactly what is owed (and what isn’t) when one party terminates the contract. F) Is payment final or just an estimate? Clarify, clarify, clarify. G) Is there a mechanism in place for when the scope/time/contract price changes? Very important and needed by both parties. H) In the same vein as G), are you approving (in writing) changes to the contract? Just a quick, non-exhaustive list of considerations for payment terms. Consult with an attorney.