Situation:
We manufacture railings for buildings and decks. We were having cash flow problems because one supplier was providing 75% of our raw materials, and even though we were on 60 day terms with that supplier, our customers took approximately 75 days to pay. Therefore, the large ticket invoices were due to the supplier before payment was actually received from our customers. We contacted and got on their Product which started covering our cash gap very well.

One day, I got a call from our account representative, and he asked me if I'd ever asked our large supplier if he would give us a discount if we would pay the invoices before 60 days. I said I had not. He encouraged me to call my supplier and ask this simple question.

I asked the question:
I promptly called my supplier, and he said he would give me a whopping 8% discount if I would pay these large ticket invoices in 30 days instead of 60 days. My jaw dropped. I sat down with my account representative to see how it would affect our overall cash flow situation by taking advantage of this supplier discount. The results were phenomenal.

Solution:
Getting on the product enabled us to cover an average 15 day cash flow gap which significantly helped our business. We were set up on a graduated discount program and the cost of the funds being out 15 days was $1,250 per one hundred thousand. The supplier invoice due each 60 days was approximately $80,000. By taking advantage of the 8% discount, we advanced on our receivables at the 30 day mark instead of the 60 day mark. This increased the cash flow gap to 45 days.

The supplier payment was $73,600, instead of $80,000, giving us a $6,400 discount. The cost of funds for being out 45 days instead of 15 days increased to $2,750 per one hundred thousand. This gave us a net savings of $3,650 by being on the product instead of an actual cost.

After 12 months of being on this optimized cash flow solution provided to us by , we were able to add over $65,000 to our bottom line – money we would not have had without having this optimized cash flow solution. Needless to say, we were ecstatic.

Summary:
solved our cash flow gap by providing funding in the amount we needed, when we needed it. We were truly managing and controlling our cash flow and finally growing our business and doing great.

Just when we thought it couldn't get any better, took us to a whole new level, and by asking a simple question, helped us add over $65,000 to our bottom line — in a one year period.