What are typical PO payment terms for overseas suppliers?
A very common structure is a 30 percent deposit when the order is placed and 70 percent before shipping, though newer relationships may be asked for more upfront. As you build a track record, you can often move toward a smaller deposit, balance on delivery rather than on shipping, or net terms such as net-30. The right structure depends on your relationship and volume.
How do PO payment terms affect cash flow?
They set how long the supplier finances your inventory instead of you. Paying 100 percent upfront means your cash is committed for the entire production and shipping cycle; net-60 terms mean the supplier carries that cost and you pay after the goods arrive. Every day of deferral shortens your cash conversion cycle and frees working capital, which is why terms are one of the cheapest levers on cash flow.
Andrew Erickson is the founder of Inventory Hero. He has spent years working with Amazon FBA sellers on demand forecasting, restock planning, and the cash flow side of running a private-label brand. Inventory Hero exists because every spreadsheet-based inventory system he tried eventually broke — usually right before Q4.
Build a track record of reliable, well-communicated orders first, then negotiate terms as part of the overall deal rather than an afterthought. Ask for a smaller deposit, for the balance on delivery instead of on shipping, or for net terms. Be willing to trade a slightly higher unit price for materially better terms if it improves your cash position, since the two are interchangeable at the negotiating table.
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PO payment terms decide a single high-stakes question: how much of your inventory does the supplier finance, and how much do you fund out of your own pocket before a unit ever sells? The short version: every day you can defer payment is a day of your cash cycle shortened, terms sit on a ladder from worst to best for cash, and you should negotiate them as part of the price rather than after it. Below are the common structures, how each affects your cash, and how to move up the ladder.
Payment structures fall on a ladder, and each rung keeps more of your cash free for longer:
100 percent upfront. The worst for cash: you finance the entire production and shipping cycle. Common for brand-new relationships and small orders.
Deposit and balance (for example 30/70). A 30 percent deposit on order, 70 percent before shipping, is the classic overseas structure. Better than full prepayment, and the split is negotiable.
Balance on delivery. Shifting the balance from before-shipping to on-delivery buys you the entire transit time in cash, often several weeks.
Net terms (net-30, net-60). The supplier ships and you pay 30 or 60 days later, financing the inventory for you. The best rung, and usually reserved for established relationships.
Most sellers start near the top of the ladder and work down as they build trust and volume.
Terms are a direct lever on your cash conversion cycle, specifically its days-payables-outstanding term. The longer you defer payment, the shorter your cycle and the less working capital the business needs:
100 percent upfront means your cash is committed from the day you order until the goods sell and Amazon pays you, often three to six months.
Net-60 means the supplier carries the inventory cost through production and shipping, and you pay only after it has arrived, sometimes close to when it starts selling.
Put numbers on it. On a 40,000 dollar order:
Terms
When you pay
Cash committed
100% upfront
At order
$40,000 tied up through production, freight, and sell-through (3 to 6 months)
30/70 on ship
Deposit now, balance before ship
$40,000, but the balance held a few weeks longer
Net-60
~60 days after delivery
Near zero until the goods are arriving, often close to when they start selling
The move from 100 percent upfront to net-60 on that single order frees roughly 40,000 dollars of working capital for the length of the cycle, which is cash you can put toward another SKU's reorder instead of borrowing. That is why terms belong in the same conversation as your cash reserve and your FBA cash flow plan.
The mistake is settling the unit price first and treating terms as a footnote. They are two dials on the same deal:
A slightly higher unit price with net-60 can beat a lower price paid entirely upfront, once you account for the cash freed and its opportunity cost.
Offer the supplier something in return. Reliable volume, prompt communication, and a clean payment history are what earn better terms; ask once you have a track record.
Start with the balance, not the deposit. Moving the balance from on-shipping to on-delivery is often an easier first win than asking for full net terms, and it still buys you the transit time.
Be realistic about net terms from Chinese factories: at under roughly seven figures of order volume they are nearly unavailable regardless of how good the relationship is, and are usually reached only through very high volume or a trade-finance intermediary. If you cannot get them yet, do not bang your head on that wall. Moving the balance from on-shipping to on-delivery, or going from 100 percent upfront to a 50/50 deposit-and-balance split, roughly halves the cash you have at risk and is a meaningful, achievable first step.
Terms are not only about cash; they also carry risk, and the two trade off:
Deposits protect the supplier, and paying nothing upfront is rare because it leaves the factory exposed.
Balance-on-delivery protects you, since you inspect or confirm receipt before releasing the final payment, which is leverage on quality.
For large orders, a letter of credit can protect both sides, though it adds cost and complexity best reserved for significant volume. As a rough operator rule of thumb, the bank fees (often a few hundred to fifteen hundred dollars) start to pencil out once a single order clears roughly 30,000 to 50,000 dollars; below that the overhead usually is not worth it.1
Match the structure to the trust in the relationship: newer suppliers warrant more upfront and tighter quality checkpoints; proven ones earn deferral. Line the payment dates up with your reorder date so the cash goes out on a schedule you planned, not a surprise.
PO payment terms determine how much of your inventory the supplier finances, and moving down the ladder from upfront payment toward net terms is one of the cheapest ways to shorten your cash cycle. Negotiate them alongside price, start by shifting the balance later before asking for full net terms, and match the structure to the trust in the relationship. Combined with an accurate supplier lead time, good terms are what let a growing catalog fund its own reorders. See restock planning for how it all fits together.
Letter-of-credit fees and the order-size threshold where they make sense are operator rules of thumb, not fixed figures; actual bank fees and terms vary widely. Confirm costs with your own bank or trade-finance provider. ↩