Finance leaders often look at inventory, staffing and other costs to save money but supplier payment terms remain an untapped opportunity. Making payment terms more favorable can free up operational cash and even reduce cost of goods sold.
How Supply Chain Financing Frees Up Working Capital
Q&A with Cole Reifler, the founder and CEO | Zenith Group Advisors
Tell us about yourself and your role with Zenith Group Advisors.
I’m Cole Reifler, the founder and CEO of Zenith Group Advisors. We’re a supply chain finance firm focused on bringing institutional-grade working capital solutions to mid-market companies traditionally underserved by large banks and platform-based lenders. Through Zenith’s insurance-backed trade payable financing model, we’re helping businesses access flexible capital without restrictive covenants, asset-heavy lending structures, or disruptive banking changes.
Supplier payment terms don't get the same scrutiny as other cost levers. What are manufacturers missing?
Finance leaders often look at inventory, staffing and other costs to save money but supplier payment terms remain an untapped opportunity. Making payment terms more favorable can free up operational cash and even reduce cost of goods sold.
The problem is that payment terms often don’t get the same level of scrutiny as pricing. Terms set five or 10 years ago stay the same. Nobody wants to risk a partnership that's working fine, so the company leaves cash on the table.
But the opportunity goes beyond day-to-day operations. That freed-up working capital can fund technology investments, automation and other growth priorities without requiring debt.
You see two distinct groups of manufacturers when it comes to this challenge. What's the difference?
In my experience, there are two major hurdles, depending on the manufacturer's cash flow.
The first group has steady cash flow, which gives them the power to renegotiate, but internal friction prevents them from taking action.
The second group includes seasonal manufacturers and companies with long supply chain cycles. They face a timing mismatch between when customers pay them and when they need to pay suppliers. For decades, these companies lacked options. They didn't have the leverage to ask for better terms and relied on debt and asset-backed loans to free up cash. But now, newer financing options exist that give mid-market manufacturers access to tools once reserved for large enterprises.
For manufacturers with steady cash flow, what's driving the inertia — and what does it take to break through it?
When I talk to CFOs at manufacturers with steady cash flow, most of them already know better terms would help but organizational barriers stand in the way.
Supplier relationships get left alone because change can be awkward and nobody wants to risk a partnership that's working fine.
Procurement and finance want different things. Procurement focuses on quality and on-time delivery, while finance wants better payment terms. The solution is marrying both teams' interests in the form of joint goals that encompass price, delivery, working capital improvement and COGS reduction.
Beyond that, nobody champions the change. It takes a senior leader who can align procurement and finance around shared goals and treat it as a financial lever, not just a procurement task. Naming the CFO as executive sponsor adds accountability and pushes through internal resistance.
Companies also tend to wait until cash gets tight, which is exactly when they've lost their leverage. Suppliers know when a buyer is stretched and negotiate accordingly. The fix is to review supplier terms as part of annual planning, not during a cash crunch.
And finally, renegotiating payment terms doesn't seem urgent because most companies haven't calculated the cash flow and cost reduction opportunity. Look at your top ten suppliers and figure out how much cash you would free up by extending each one's payment terms by 30 or 60 days. Those numbers make the case.
Seasonal manufacturers and companies with long supply chain cycles face a timing mismatch rather than an organizational one. What options do they have now that they didn't before?
Traditionally, these manufacturers had limited options. They could take on debt or put up assets as collateral. New financing programs require neither, while giving manufacturers the leverage to negotiate better terms, reducing costs and improving working capital.
Supply chain finance lets a manufacturer pay suppliers early through a third-party financing partner. The manufacturer gets more time to pay and suppliers get paid faster. Unlike traditional debt, some programs don't require collateral or disrupt existing banking relationships. For a manufacturer trying to fund automation upgrades or new equipment, supply chain finance has opened new opportunities.
Once manufacturers free up that working capital, what does it actually unlock?
Supplier terms affect working capital, COGS and growth, all at once. The operational benefit is that you're no longer scrambling to cover payables during a slow season or a long production cycle.
But the more strategic opportunity is what you do with that liquidity. Freed-up working capital can go toward technology investments, such as automation, advanced manufacturing equipment, factory digitization, that manufacturers have been deferring because cash was tied up in payables.
Can you walk us through a real example of this working in practice?
We worked with a leading mid-market food manufacturer with $250 million in revenue. The company distributed to major retailers and was strained by 60-day payment cycles and high supplier costs. Seasonal demand and rising ingredient prices made the cash flow problem worse.
The company needed a solution that could accelerate supplier payments and unlock working capital without disrupting existing relationships. The manufacturer set up a $10 million supplier credit transaction that provided 100% unsecured liquidity, extending its own payment terms from 39 to 120 days while suppliers got paid faster than before.
In exchange, suppliers offered price concessions that lowered COGS by 10%. The company also unlocked 50% more in early payment discounts than it had previously been able to capture. The full program was up and running in three weeks. No collateral was required. The company's existing bank lines were untouched. The extra liquidity funded the next stage of growth, while the COGS reduction improved margins for the long run.
The content & opinions in this article are the author’s and do not necessarily represent the views of ManufacturingTomorrow
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