Terms are the cheapest lever you have. Price is negotiated once a year and defended line by line. Terms usually aren't negotiated at all — they're inherited from whatever the quote template said in 2011.
That's where the money is. Changing when you get paid doesn't cost you a point of gross margin, and it doesn't require a customer to accept a higher number.
What ship-and-bill actually costs
Take a shop doing $40M on made-to-order work, average build ten weeks, material at 45 percent of price.
On a $500,000 order, that's $225,000 of material — bought early, because you can't start without it. That cash leaves on day one.
If you bill nothing until shipment and terms are net 45, you carry that $225,000 for roughly ten weeks of build plus 45 days after. Call it 115 days. That is nearly four months of your money sitting inside someone else's project.
Put a cost on it. At a 9 percent line rate, $225,000 × 0.09 × 115 ÷ 365 is about $6,400. On a $500,000 order that's roughly 1.3 points of margin, spent on financing, before anyone has argued about price.
You gave away more than a point of margin in the quote template, not at the negotiating table.
Now run it the other way. A 30 percent deposit on that order is $150,000 at PO. That covers two-thirds of the material on day one, and the interest math shrinks with it.
Deposits are a pricing decision, not a credit decision
Most shops frame the deposit ask as a question about the customer's creditworthiness. That framing loses the argument every time, because the customer is good for it and you both know it.
Frame it as scope instead. You are buying long-lead material against their specification. That material has no value to anyone else. The deposit funds their order, not your balance sheet.
And price the alternative. If a buyer wants ship-and-bill with net 60, that's a service, and it has a rate. Quote both: net 30 with a deposit at one number, extended terms at a number that recovers the carry. Let the customer choose. Many will take the discount.
Milestones that actually bill
Progress billing fails on the shop floor, not in the contract. The clause exists; nobody triggers it.
Tie milestones to events your operation already records and can prove on the day they happen:
- drawing or design release approved
- long-lead material received
- fabrication or mechanical complete
- factory acceptance test passed
- ship, then final on acceptance
Each one needs a named owner and a document the customer already signs. If a milestone depends on a project manager remembering to email finance, it will bill late or not at all.
A milestone nobody can evidence on the day it occurs is not a billing term, it's an intention.
The same discipline catches change orders. When milestones are live, the extra work has somewhere to land — priced, signed, and attached to the next billing event rather than absorbed and discovered at close-out.
Where to start
Pull your last twenty orders over some threshold that matters to you. For each, note the date material was committed and the date cash first arrived. The gap, in days, is your real exposure.
At $40M a year, one day of revenue is about $110,000. Take ten days out of that gap across the book and you've freed roughly a million dollars — the same cash a lender would want covenants for.
Then fix the quote template. That's where the terms conversation is either had or avoided, and it's the one document every order passes through.
Written from the controller’s chair — the same discipline the diagnostic runs on your own numbers.