Cash flow Risks in Selling Expensive Machinery on Terms
In this article, we take a look at some of the cash flow risks that merchants selling expensive machinery on terms experience every day.
November 7, 2025
-
0
min read
Selling machinery can be challenging in itself, but selling expensive machinery on terms can open up a whole host of other issues. On the one hand, a more expensive item means a better margin, and everyone wants the biggest margin possible in business. On the flip side, dealing with expensive items requires capital for decent cash flow, and that can get tricky. Remember, machinery sales are substantially different from selling smaller cosmetics. Each unit is costly to manufacture, transport, and install, and a single unpaid invoice can disrupt a supplier’s entire cash cycle.
In this article, we take a look at some of the cash flow risks that merchants selling expensive machinery on terms experience every day.
Why selling machinery on terms creates cash flow risk
In B2B machinery sales, credit is often vital to make the deals work and the business function in general. Buyers expect flexibility, particularly when investing in assets worth tens or hundreds of thousands of pounds. Think about the immense costs involved in the machinery made by firms like AMD when it comes to semiconductors; these are huge ticket items. Buyers expect credit, but as we know, the very nature of extending credit introduces risks.
Deferred payments create delays
Most machinery sales are completed on terms such as Net 30, 60, or even 90 days. While this helps customers manage their budgets, it means suppliers have to wait weeks or months before ever seeing any cash from their sales. During that time, they are forced to cover all the costs of production and delivery.
High production and delivery costs
Manufacturing machinery is capital-intensive all across the supply chain. Suppliers must buy raw materials, pay for specialised labor, and sometimes cover shipping and installation before they get paid. For a small to mid-sized manufacturer, this upfront outlay can represent a significant chunk of available working capital, which is why much of the production of machinery is done by large companies with access to the capital that is constantly needed.
Capital intensity of machinery sales
Machinery is a whole different playing field in terms of items; it's extremely high value and low volume. One unpaid or late invoice can represent a large share of revenue for the quarter. This makes cash flow volatility far greater compared to businesses that sell in smaller, more frequent transactions. You might spend 3 or 4 months closing a deal that will represent 75% of the cash flow for the year.
{{iwoca-pay-cta="/components"}}
Key cash flow risks in high-value b2b machinery sales
Cash flow risks for machinery suppliers are very real and can escalate quickly. Due to the sheer size of the high-ticket item, a single late payment can disrupt operations and put a strain on working capital.
Late payments
When someone delays payment along the supply chain, it affects everyone's cash flow. Buyers may stretch agreed terms or miss deadlines, forcing suppliers to juggle operating expenses with little incoming revenue. According to UK Finance, average days sales outstanding (DSO) in manufacturing often exceeds 50 days, compared with around 30 in other sectors. That extra 20 days can mean the difference between covering payroll on time and dipping into overdraft.
Bad debts
In worst-case scenarios, a customer defaults altogether, leaving suppliers with a financial hole that may take months or years to recover from. Many times, recovery isn't even an option. Machinery suppliers are particularly exposed because one unpaid invoice could equal hundreds of thousands of pounds. Without credit checks, staged payments, or trade credit insurance, the risk of insolvency increases significantly.
Excess inventory risk
Even though in the majority of cases the machinery is made to order, suppliers sometimes hold stock to shorten lead times or capture last-minute demand. They might even hold stock of some components to speed up the time of delivery for the end product. Unsold inventory locks up valuable working capital and may require additional storage costs. If demand shifts, businesses can end up with expensive assets gathering dust in warehouses.
Seasonal or cyclical demand
Machinery sales are often tied to industries like construction, agriculture, or heavy manufacturing. These sectors are cyclical, meaning demand spikes and falls depending on the season or the economic cycle. A slow quarter paired with overdue invoices can deepen liquidity issues and restrict a company’s ability to invest or even maintain operations.
Impact of negative cash flow on business operations
So, it's obvious that selling on terms can have a negative effect on cash flow. Cash-flow challenges can cause all sorts of headaches for businesses. Including but not limited to the following:
Strain on payroll and staffing
Employees expect their wages on time, regardless of when customers pay. For machinery suppliers, where a large proportion of staff are highly skilled engineers, technicians, or installers, failing to meet payroll undermines trust and risks talent retention. Smaller businesses, in particular, may not have deep reserves to bridge these gaps, making even short delays a source of anxiety and disruption.
Delayed supplier payments
When customers don’t pay on time, suppliers may delay paying their own vendors for raw materials, parts, or logistics. This can damage relationships with critical suppliers, strain existing credit lines, and lead to reduced negotiating power. In the worst cases, vendors may cut off supply or demand stricter payment terms, which can make the cash flow pressure even more dire.
Growth and investment bottlenecks
Cash shortfalls can really hamper a company's ability to grow. Without consistent cash inflows, machinery suppliers may have to put research and development projects on hold or scale back existing marketing campaigns. This can be a huge downside for industries where innovation and customer confidence are vital; these delays can erode long-term competitiveness.
Example: The domino effect of one late payment
Let's use an example of a mid-size manufacturer in Yorkshire. The company secured a £400,000 contract with a large retail chain, offering Net 60 payment terms to win the deal. Production costs, which include things like parts, labour, and logistics came to £280,000, which the company pays upfront.
How numbers impact business
When a large retail buyer delayed payment by 30 days on a £400,000 machinery order, the supplier faced a cash flow gap of nearly £200,000. The impact unfolded in several stages:
- Payroll stress: The company dipped into its overdraft to cover wages for 40 staff, raising borrowing costs.
- Supplier strain: Key component suppliers were paid late, and one vendor suspended deliveries until invoices were cleared.
- Growth stalled: A new assembly line project was delayed by six months, slowing innovation and giving competitors time to catch up.
This isn't an isolated case. Government data reveals that late payments are a widespread issue across multiple UK industries, particularly in manufacturing and construction, sectors that overlap heavily with machinery suppliers.
Strategies to mitigate cash flow risk when offering terms
Selling machinery on terms is often unavoidable, but suppliers don’t have to be unprotected. Practical strategies can safeguard cash flow, reduce uncertainty, and build confidence when offering credit. The aim isn’t to remove all risk but to anticipate problems early and set clear guardrails.
Better forecasting, structured payment plans, disciplined collection, and understanding how things work from both the macro and micro views all help create a stronger buffer against the impact of late or missed payments.
Protect your cash flow through steps
{{find-out-iwocapay-cta="/components"}}
Leveraging trade credit and BNPL to stabilise cash flow
Even with strong credit policies, cash flow gaps can still occur. Machinery sales are high-value, slow-moving, and depend on buyers’ financing. Trade credit and BNPL solutions work together to give suppliers both protection and flexibility.
Traditional trade credit
Trade credit has long been the backbone of B2B transactions. It lets buyers purchase machinery and pay later, typically within 30, 60, or 90 days, giving them time to generate revenue before settling the bill. For suppliers, it’s a key sales tool, as flexible terms can often seal large contracts.
However, trade credit has clear limits. It may protect against non-payment through insurance, but it doesn’t fix delayed cash inflows or uncertainty around when funds will arrive. Suppliers can still wait months for payment, straining working capital and slowing production. Managing invoices, assessing risk, and chasing payments also take time/resources better spent on manufacturing and sales.
Role of BNPL in machinery sales
This is where modern BNPL solutions like iwocaPay transform the equation. BNPL is designed for business-to-business transactions, not just consumer purchases. It allows suppliers to receive upfront payment in full, while buyers get the flexibility to spread costs across monthly installments.
For example, imagine a supplier selling £200,000 worth of industrial equipment to a manufacturing client. With iwocaPay, the supplier can be paid immediately when the invoice is issued. Meanwhile, the buyer repays iwocaPay in manageable instalments over several months. The supplier eliminates the risk of waiting for funds, while the buyer gains breathing space to manage cash flow without compromising production.
Operational Advantage
Beyond liquidity, BNPL solutions bring a major operational advantage. Digital platforms like iwocaPay automate many of the pain points in B2B payments, improving efficiency and consistency across the payment cycle:
- Instant credit decisions: Instead of manually assessing buyer risk, automated systems use data-driven scoring for quick approvals.
- Streamlined invoicing: Payment links are embedded directly into digital invoices, reducing friction and human error.
- Transparent tracking: Both buyers and suppliers can monitor payment schedules in real time, minimising confusion and disputes.
- Reduced collections workload: Because payments are processed automatically, suppliers spend less time chasing overdue invoices and more time focusing on growth.
