A company is growing fast acquiring customers on an ongoing basis. The nature of the business is such that when the orders come in, the clients pay a 20% down payment with the remainder being paid on delivery. Despite the high profit margin of 70%, and the great success in orders coming in, the company quickly starts to feel the financial stress since they need to pay for the full amount of the products when they ship them and wait until their clients pay them the remaining amount.

The CFO seeks bank financing to help in the transition, but the banks inform the CFO that he needs to try to create a healthier cash flow before seeking bank loans. The CFO takes the advice, and negotiates with the suppliers to give 60 days’ payment terms even if they increase the price by 2%. He then informs the sales team that they should not accept less than 50% down payment and can give up to 10% discounts for clients that pay upfront.

After a few months with these changes in place, the CFO found that the banks were now fighting over who would give him better loan terms.