Offering net terms as a CPG supplier, without the risk

How net terms work in consumer packaged goods

In consumer goods the shelf pays last, and everyone upstream inherits its calendar. A brand selling into a national retailer or distributor is paid on the buyer's terms, not its own — commonly net 60 to net 90, with Costco the well-known exception — and the remittance arrives short of the invoice, because promotional allowances, shortage claims and compliance fees are deducted before it's paid. The co-manufacturer that ran the product, the converter that made the packaging and the ingredient supplier behind it are all paid out of that same delayed, netted-down cash. Whether you sell to the brand or you are the brand selling to a distributor, your buyer's money comes from the shelf, on the shelf's schedule.

That makes terms a sales weapon here as much as anywhere in distribution. A brand waiting ninety days on a grocer consolidates its purchasing with the co-packer or packaging supplier that gives it room; the one insisting on half up front is competing on price alone. The catch is where the credit comes from. What your own input suppliers give you is rarely as long as what your customers ask for downstream, and the spread between the two lands on your balance sheet.

What the wait does to a CPG supplier's cash

Selling on terms means every dollar of growth mints receivables before it mints cash, and in consumer goods the paper understates the wait twice. First, on timing: major retailers and national distributors take 60 to 90 days by contract, the effective wait runs past the stated term, and once production and transit are counted before the clock even starts, PO-to-cash for a supplier into a major retailer commonly runs 90 to 150 days. Second, on amount: published industry estimates put retailer deductions at roughly 5 to 15% of gross sales, and trade allowances are often billed 60 to 90 days after the promotion they fund. A net-30 invoice into that world behaves like net 60-plus, on a number you don't know yet.

Then there's the risk. Books in this vertical are concentrated — a handful of distributor, chain or brand accounts often carry most of the receivables — and the distributor layer adds a step: a distributor's own terms with its retailers are net 60 to 90, so its payment to you waits on theirs. Emerging brands are the fastest-growing accounts and the most fragile; one that wins a national line review and can't fund the inventory build is a real credit risk to its co-packer and packaging suppliers. And unlike construction, there is no lien on goods that have already sold through. An unsecured receivable in a brand's wind-down recovers little.

How CPG suppliers handle it

The traditional toolkit first, honestly. Running your own credit desk — applications, trade references, personal guarantees, collections — works, costs headcount, and leaves the core problem in place: you still finance the wait out of your own working capital. Trade credit insurance covers you if a buyer fails but pays nothing to make you liquid sooner, sets named-buyer limits that sit uneasily with a concentrated book, and excludes disputed amounts — a deduction is not an insured loss. Invoice factoring converts issued invoices to cash in a day or two — advances of typically 70–90% of face value, fees of roughly 1–5% per invoice — but it's disclosed, so your customer receives a notice of assignment and pays the factor; most "non-recourse" agreements cover buyer insolvency only; and factors treat deductions as dilution and cut the advance rate for it. A bank line of credit is the cheapest money if you qualify, at the price of covenants, borrowing-base reporting and availability of roughly 80–85% of eligible receivables — with high-dilution consumer goods receivables often haircut further.

The structural fix moves both the wait and the risk off your book at the point of sale: Yellowpay pays the invoice within 2 business days and takes the buyer credit risk. You quote terms as part of the sale, the platform underwrites the buyer, and the buyer keeps a normal invoice relationship — no notice of assignment. For consumer goods suppliers, terms run up to net 90, and a buyer's pre-approval covers their future orders. Where it doesn't fit: the platform triggers when you invoice, so it does nothing for the co-packer deposit or the ingredient pre-buy on your side of the run; a commercial dispute — a shortage claim, a promotional billback — stays between you and your buyer, because a deduction isn't a default; and a national retailer that runs its own payables program won't pay a third party, so for those accounts the toolkit above is still the toolkit. It fits distributors, regional and independent retail, e-commerce resellers, and brands buying from their co-manufacturers and input suppliers.

What payment terms do distributors and retailers actually take?

Net 30 is the default for independents and regional chains. National distributors and major retailers negotiate net 60 to net 90 by contract and category, and the effective wait runs past the stated term; Costco is the notable exception at roughly net 30. New accounts often start on prepayment or shorter terms — exactly the friction a terms program removes.

Who takes the loss if a buyer goes under?

Under self-funded terms or recourse factoring, you do — and most "non-recourse" factoring covers buyer insolvency only, not disputes or slow pay. Credit insurance or a genuinely non-recourse trade credit platform moves buyer default off your book. None of them cover deductions, which are commercial rather than credit — read what's excluded before you rely on it.

Related

Glossary → · How much cash is your wait costing? → · Retailer deductions, explained → · Trade credit for consumer packaged goods →