How to Avoid Stalling Business Growth Due to Large Supplier Invoices

Large supplier invoices often arise when a company increases sales, receives a new order, or launches a new line of business. To meet its goals, the company needs to purchase more goods, raw materials, components, or equipment. After paying for a shipment in full, there may not be enough money left in the account to cover salaries, taxes, logistics, marketing, and the next order.

A manager must simultaneously fulfill obligations to a counterparty and preserve resources for ongoing operations. The decision depends on the sales cycle, future revenue, mandatory expenses, and the minimum liquidity reserve. These indicators help determine a safe payment amount and select an appropriate payment schedule.

Why do large supplier invoices create a working capital shortage?

In the wholesale and manufacturing sectors, businesses initially finance the purchase, delivery, storage, and preparation of products for sale. The money invested is recouped gradually as customers purchase goods or pay for completed orders. Several weeks or months may pass between payment to a supplier and the receipt of revenue.

The following factors increase the strain on liquidity:

• large supplier invoices with short payment terms;
• a requirement to pay in full in advance;
• an increase in the minimum order quantity;
• long inventory turnover period;
• stockpiling of products ahead of the seasonal peak;
• delayed payments from customers;
• several large payments within a single week;
• purchasing equipment with your own funds;
• rising operating costs as the business scales up;
• lack of established reserves.

Even a profitable company may temporarily experience a cash shortage. For example, goods have already been shipped to a customer and the sale has a planned margin, but the funds will not be received for another 45 days. Suppliers, carriers, and employees need to be paid sooner.

This time lag restricts subsequent operations. The company postpones restocking its inventory, cuts back on advertising, or turns down a lucrative order. If the problem recurs, revenue growth is accompanied by a constant liquidity shortage.

How do you determine the amount that can be allocated to purchasing?

The bank account balance shows the amount of money available at a specific moment, but part of that amount is already earmarked for mandatory payments. Before approving a purchase, you need to subtract salaries, taxes, rent, logistics costs, debt payments, and a minimum operating reserve.

For a preliminary calculation, you can use the following formula:

Available funds + expected inflows − mandatory payments − minimum liquidity reserve = amount available for procurement.

Let’s consider a hypothetical example involving a distributor. The company has 1 million UAH in its accounts, and a supplier has issued an invoice for 800,000 UAH. Over the next month, the company needs to pay 250,000 UAH in salaries and taxes, and 100,000 UAH for rent and logistics. The minimum reserve is set at 150,000 UAH.

Excluding future receipts, the company can safely spend:

1,000,000 − 250,000 − 100,000 − 150,000 = 500,000 UAH.

Paying the full amount of 800,000 UAH will leave 200,000 UAH in the account. After salaries, taxes, rent, and logistics, there will be a shortfall of 150,000 UAH, and the reserve will be completely depleted. Therefore, having 1 million UAH does not necessarily mean the account can be safely paid off.

The calculation must be supplemented with expected receipts. If customers are expected to transfer 600,000 UAH during the month, the manager verifies the specific dates and payment history of each counterparty. It is risky to include the amount of overdue or unconfirmed invoices in the base-case scenario.

A weekly cash flow forecast will show the lowest account balance during the projection period. It should include all inflows, operating expenses, repayment of accounts payable, and scheduled payments to suppliers.

How should you negotiate payment terms with suppliers?

It is advisable to begin negotiations before the payment due date. Approaching the supplier in advance allows both parties to agree on a schedule that takes into account the delivery and sale of goods, as well as the counterparty’s financial needs. A request to defer a payment that is already past due creates additional risk for the supplier.

The following measures can help reduce the one-time strain on cash flow:

• partial prepayment with final payment after shipment;
• dividing the total amount into several agreed-upon payments;
• deferral of payment for a specified period;
• payment in stages as individual shipments are received;
• reduction of the minimum order quantity;
• a customized payment schedule for regular customers.

Suppliers need predictability. Instead of asking the buyer to “give more time,” it’s better to offer a specific payment plan: 300,000 UAH upon order confirmation, 250,000 UAH after shipment, and 250,000 UAH in 30 days. This format allows the counterparty to assess its own cash flow.

A stable order history, no late payments, a procurement forecast for several months, and a willingness to formalize agreements in a contract all strengthen a supplier’s negotiating position. If the supplier is unable to change the terms, the company moves on to evaluating external financing options.

When does a large purchase support growth, and when does it tie up capital?

A larger order is justified when there is forecasted demand, a product shortage in the market, a long lead time, or a significant price advantage. However, a volume discount should not be the only consideration. It is necessary to assess how long the goods will remain in inventory and when the invested funds will return to circulation.

To compare purchases, companies analyze inventory turnover, the time to sell a batch, gross margin, projected demand, the percentage of slow-moving items, and payment terms with customers. Additional factors taken into account include storage, insurance, potential damage, obsolescence, and future discounts.

Suppose a batch worth 300,000 UAH is sold within 30 days and generates 90,000 UAH in gross profit. A purchase of 900,000 UAH, thanks to a wholesale discount, has a potential gross profit of 315,000 UAH; however, it takes 120 days to fully sell the inventory. For four months, a significant portion of the money remains tied up in inventory.

During this time, a business may miss out on several opportunities to quickly replenish its best-selling inventory. There is also an increased risk of shifts in demand and the need to sell off excess inventory at a discount. A lower unit price is beneficial only when the savings exceed the costs of financing, storage, and slower capital turnover.

The decision needs to be tested under several scenarios. The business financial model allows you to adjust sales volume, margins, and collection timelines to see how purchasing will affect cash flow. A stress scenario might involve sales 20% below target or a two-week delay in customer payments.

How can financing help spread out a large payment?

External financing can be considered when a purchase has predictable demand and a sufficient margin, but paying the invoice in full would excessively deplete the company’s liquidity reserves. In such a situation, the company receives the goods or services, and the payment burden is spread out over several periods.

Procurement financing makes it possible to link future payments to the expected sale of a batch. In the example above, the company can pay the supplier 500,000 UAH from its own funds and finance the remaining 300,000 UAH. This way, it will preserve resources for salaries, taxes, logistics, and future operations.

Available options may include a line of credit, an overdraft, a supplier credit, factoring, B2B BNPL, and installment payments for businesses. eDilo offers an online credit limit calculation based on your TIN or EDRPOU code, application approval within 30 minutes, terms of up to six months, and no collateral or guarantor required. Actual availability and terms depend on the outcome of the application review.

Paying an invoice in installments changes the cash flow schedule, so all future payments must be included in the payment calendar. If a product is sold on a 60-day term and the main payment is due on the 30th day, the company may still face a cash shortfall. The financing term must be aligned with the purchase’s operating cycle.

How do you compare paying in full versus financing a purchase?

The decision should be based on two cash flow projections. In the first, the company pays off the entire invoice immediately. In the second, it retains a portion of its own funds and pays according to an agreed-upon schedule. The comparison will reveal the remaining liquidity, the cost of the borrowed funds, and the company’s ability to meet other obligations.

The evaluation process consists of ten steps:

1. Determine the total amount of the bill.
2. Calculate the business’s available working capital.
3. Set a minimum liquidity reserve.
4. Forecast the time it will take to sell the purchased batch.
5. Calculate the expected gross margin.
6. Determine the dates when payments will be received from customers.
7. Calculate the total cost of the financial resource.
8. Create a payment schedule for each option.
9. Compare future payments with the projected cash flow.
10. Test a scenario with lower sales or delayed cash inflows.

The availability of financing does not necessarily confirm its economic feasibility. The cost of the borrowed funds must fit within the profit margin, and the repayment schedule must align with the inventory turnover period. It is also necessary to review the fees, borrower requirements, consequences of late payments, and the option for early repayment.

For example, the expected gross profit on a purchase is 200,000 UAH. If financial and additional expenses consume most of this amount, the manager needs to reevaluate the batch, the selling price, or the terms of the deal. At an acceptable cost and while maintaining a sufficient reserve, spreading out payments can support further growth.

Checklist: What to Do After Receiving a Large Invoice

Decisions should be made after reviewing liquidity, the operating cycle, and the economics of the purchase. This practical checklist will help you analyze the situation step by step:

1. Don’t judge your ability to make a payment based solely on your account balance.
2. Check your payment schedule for the next 30–60 days.
3. Determine the minimum reserve required for operating activities.
4. Verify accounts receivable and their actual due dates.
5. Estimate the turnover rate for the planned shipment.
6. Calculate the margin on future sales.
7. Check whether a partial payment to the counterparty is possible.
8. Propose a payment schedule to the supplier with specific amounts and dates.
9. Determine the need for external resources.
10. Compare its total cost with the result of the purchase.
11. Develop a base-case and a stress-test cash flow scenario.
12. Choose the option that ensures sufficient liquidity.

After selecting a scenario, you need to update the budget, accounts payable, and payment schedule. The responsible employee must monitor batch sales, inventory levels, payments from customers, and adherence to the schedule. If inventory turnover is lower than forecast, the next purchase order is adjusted before a cash shortfall occurs.

A large invoice affects a company’s ability to finance future operations. Before it is paid, the manager must compare future cash inflows, mandatory expenses, the minimum reserve, and the time required to recover funds from inventory. On the eDilo website, you can check the available payment plan options for a specific B2B purchase.