How Payment Term Gaps Disrupt Cash Positioning in Growth-Stage Businesses

In growth-stage businesses, a common but overlooked problem is the gap between when you pay suppliers and when you receive payments from customers. 

Even profitable businesses can face cash shortfalls due to mismatched receivable and payable terms.. For instance, paying bills within 15 days but holding out 60 days for payments from customers will leave you short of cash in between.

Misaligned cash inflows and outflows can create planning challenges, often requiring decisions like borrowing or deferring payments. Identifying and controlling these gaps is necessary to maintain your cash flow stable and enable the growth of your company.

What Are Payment Term Gaps?

In growth-stage companies, payment term differences represent the timing discrepancy between when a firm needs to make payments to its suppliers and when it gets paid by its customers. These differences aren't insignificant timing matters—they impact cash availability and guide operational choices.

For example, a fast-growing SaaS organization would pay its cloud infrastructure suppliers on Net-15 terms, and enterprise customers are billed on Net-60 terms. This results in a 45-day gap where cash outflows precede incoming revenue.

As the firm grows, the gap may grow. Sales teams can grant longer payment terms to close larger deals, but supplier payment cycles tend to be set in stone. This differential compresses working capital and restricts investment in hiring, product innovation, or growth

Why Payment Term Gaps Disrupt Cash Positioning

In growth-stage businesses, cash positioning refers to the active management of available funds to meet short-term obligations without relying on external financing or disrupting operations. It involves daily or weekly oversight to ensure liquidity is maintained where and when it’s needed — across accounts, entities, or geographies.

Payment terms break this planning when there is a disconnect between outflows and inflows.

For instance, if your company pays vendors on Net-30 while paying customers on Net-60, the discrepancy causes a chronic cash shortage, even though profitability may appear good on paper.

This gap causes ripple effects across cash management operations:

• Cash forecasting becomes less reliable – Receivables may be recorded, but without timely collection, projections can overestimate liquidity.

• Payment delays risk vendor relationships – When outgoing cash is short, businesses often defer payables, weakening supply chain stability.

• Short-term borrowing increases – Bridging the cash gap often means dipping into credit lines, incurring interest and reducing flexibility.

In essence, payment term gaps distort cash visibility and weaken the company’s ability to act on opportunities or respond to risks, at the speed required for growth.

Why Growth-Stage Businesses Are Particularly Vulnerable to Payment Term Gaps

When businesses begin to scale, their exposure to payment term gaps intensifies. Revenue might be growing, but the cash it brings in isn’t always arriving on time. And that timing mismatch is exactly where the trouble begins.

Here’s why vulnerability runs higher at this stage:

1. Revenue growth outpaces receivables collection

Revenue may scale quickly, while receivables continue to follow extended payment terms like Net-45 or Net-60. This means more revenue is tied up in accounts receivable while expenses keep climbing.

2. Fixed costs begin accruing early

As the company scales, it begins hiring, committing to office leases, increasing inventory, and investing in tech or equipment. These are upfront cash outflows that occur before receivables are collected.

3. Customer power dictates terms

Enterprise customers often leverage their purchasing power to extend payment timelines. A growth-stage business might not have the leverage to push back, so they accept Net-60 or Net-90 just to close the deal.

4. Cash reserves are thin

Unlike mature businesses, growth-stage companies typically reinvest profits. This leaves little buffer to absorb delayed cash inflows, especially when back-to-back invoices stack up.

5. Forecasting systems are still maturing

Early-stage finance teams often lack the systems or insights needed to monitor and adapt to shifting payment cycles effectively. That makes it harder to see and plug cash gaps before they become urgent.

In short, growth companies are structurally exposed: fast-moving revenue growth meets slower, less predictable cash inflows, and that mismatch puts pressure exactly where it hurts most: working capital.

How to Identify Payment Term Gaps in Your Business

Identifying payment term gaps isn’t just about spotting late payments. It’s about detecting where your cash outflows and inflows are structurally misaligned, often hidden in plain sight across your customer contracts, supplier agreements, and internal billing cycles.

Here’s how to approach it with clarity:

1. Map Your Customer Payment Terms vs. Supplier Terms

Pull up a side-by-side view of your accounts receivable (AR) terms and accounts payable (AP) terms.

• Are customers paying you on Net-60 while you pay suppliers on Net-30?

• Are there high-value customers with longer payment cycles compared to smaller ones?

The bigger the mismatch, the more you’re fronting operational costs without matching income.

2. Analyze Days Sales Outstanding (DSO) and Days Payable Outstanding (DPO)

Use this to quantify the timing gap between money in vs. money out.

• DSO tells you how many days, on average, it takes to collect revenue after a sale.

• DPO shows how many days you take to pay suppliers.

If DSO is significantly higher than DPO, your business is effectively funding operations from its own reserves.

3. Segment AR by Customer and Term Compliance

Not all customers behave the same way. Run an AR aging report and categorize:

• Customers who consistently delay payments

• Clients with favorable terms but poor adherence

• Segments where revenue is growing but payment reliability isn’t

This allows you to analyze both contractual terms and how payments are made in practice.

4. Tie Payment Lags to Cash Flow Stress Points

Review cash flow statements over the last 6–12 months. Identify specific weeks or months when:

• Payroll ran tight

• You had to tap credit facilities

• Vendor payments were delayed

Trace these stress points back to late or extended customer payments. That’s where term gaps hit hardest.

5. Look for End-of-Quarter or Seasonal Spikes

Many businesses push sales at quarter-end, but collections lag into the next quarter. Look for patterns like:

• Spikes in AR at quarter-close

• Increased sales discounts to accelerate cash

• Temporary cash shortfalls despite high bookings

These show structural payment gaps tied to your own sales cycle rhythm.

If you’re not actively tracking these signals, payment term gaps can hide behind growing revenue. But once mapped, they show exactly where your cash is leaking time—and costing flexibility.

Conclusion

Payment term gaps affect more than just cash flow — they affect day-to-day decisions and strategic timing. As revenue grows, these gaps can scale unnoticed, limiting your ability to hire, invest, or pursue expansion with financial certainty.

The earlier you identify and address them, the stronger your cash positioning becomes, not just for meeting today’s obligations, but for navigating tomorrow’s growth with agility.

At CFO Bridge, our fractional CFOs work with growth-stage businesses to diagnose where these gaps are widening and help design payment term strategies, AR/AP cycles, and working capital models that restore flexibility. If your cash feels tight despite strong revenues, we’re here to help.