For many African SMEs, the gap between paying suppliers and receiving cash from customers is the most dangerous part of the business cycle.
When liquidity tightens, the instinct is to push for longer payment windows. However, if handled poorly, these requests can trigger credit holds, higher unit costs, or even a total breakdown in supply reliability.
Negotiating better terms is a strategic tool for growth, but it must be approached as a commercial discussion rather than a request for a favour.
Avoid the trust trap
The most common mistake is negotiating from a position of crisis. Asking for 60-day terms when you are already 15 days late on a current invoice signals insolvency rather than strategic management.
Suppliers view late payments as a high-risk indicator. If you only approach them when cash is exhausted, they may tighten your credit limits or demand upfront payment, which further squeezes your working capital.
Another error is lack of transparency. Being vague about why you need more time makes suppliers suspicious. They may assume your business model is failing rather than acknowledging a predictable seasonal fluctuation.
Finally, avoid one-sided negotiations. If you focus solely on your own cash flow needs without considering the supplier’s requirement for liquidity, you risk becoming a low-priority client during periods of market scarcity.
Strategies for a value-based approach
Successful negotiation relies on a value exchange. If you are asking for more time, you should offer something in return that reduces the supplier’s perceived risk.
One effective method is the volume-for-terms trade. A retailer in Lagos might offer to increase their monthly order volume by 15% in exchange for moving from Net-14 to Net-30 terms.
For a manufacturer, this could mean signing a longer-term exclusivity agreement. In exchange for the security of a consistent, long-term contract, the supplier may be more willing to extend credit windows to support your production cycles.
You can also suggest a pilot period. Instead of asking for a permanent change, propose a three-month trial of longer terms for specific product lines. This allows the supplier to test your reliability without making a permanent adjustment to their credit policy.
Aligning your request with your revenue cycles is also critical. If your business experiences predictable surges, such as during festive seasons, present this data to your supplier. Show them that the request for extended terms is a planned response to inventory buildup, not an emergency.
Immediate action: Review your top five suppliers this week. Identify which ones have the most stable supply chains and prepare a data-backed proposal for adjusted terms based on your projected seasonal needs.
