📌 Key Takeaways
Working capital strain from payment terms turns month-end into a firefight when kraft paper bills come due weeks before customer payments arrive.
- The Cash Gap Is Structural, Not Situational: When suppliers demand payment in 30–60 days but customers pay in 60–90 days, the resulting funding gap forces converters to lock up more cash than their overdraft limits can comfortably support.
- Alignment Beats Blame: Finance sees overdraft stress while procurement protects supplier relationships, but a neutral checklist transforms tension into a shared action plan both functions can own.
- Small Experiments Reduce Big Risks: Testing extended terms with a secondary supplier representing less than 10% of volume, or offering 20–30% customer part-payments on dispatch, provides proof of concept without exposing critical relationships.
- Tracking Creates Accountability: Monitoring simple measures like average overdraft usage this month versus last quarter and approximate cash gap in days turns abstract strain into visible progress over 30–60 day cycles.
- Predictability Replaces Panic: Treating payment terms as design levers rather than fixed constraints gives SME converters control over their cash rhythm, moving from constant firefighting to calmer month-ends.
Finance heads, procurement leaders, and owner-operators at SME packaging converters will find a practical framework here, preparing them for the detailed checklist and implementation guidance that follows.
SME packaging converters face a persistent cash flow challenge: kraft paper suppliers often demand payment terms (e.g., Net 30 to Net 60) that are significantly shorter than the terms customers typically remit payments on (e.g., Net 60 to Net 90), creating a structural funding gap that strains working capital. This checklist provides finance and procurement leaders with a structured approach to align on practical next steps that reduce working capital pressure without requiring drastic changes. By treating payment terms as design levers rather than fixed constraints, small converters can move from constant firefighting to a calmer, more predictable cash rhythm.
The Cash Conversion Cycle Problem Most Converters Face
Working capital strain from payment terms is a structural cash-flow problem where the timing and length of supplier and customer payment terms create a gap that forces SME packaging converters to lock up more cash in kraft paper inventory than their working capital can comfortably support. It’s like having to pay for all the cardboard boxes weeks before you see any money from the customers using them.
SME packaging converters juggling 30–60 day kraft paper supplier terms against 60–90 day customer payments find themselves running overdrafts near their limits and firefighting month-end cash crises without a clear view of their cash conversion cycle. As orders grow, paper purchases grow first while customer payments lag behind, leading to tense supplier calls, hurried bank meetings, and constant juggling of which invoice to pay next.
This pattern isn’t unique to kraft paper. International institutions such as the World Bank and OECD regularly note that small and medium enterprises across sectors face persistent constraints around access to working capital and cash-flow management, even when the underlying business is sound.
The gap between paying mills and collecting from customers isn’t just an inconvenience. It’s a structural constraint that limits growth, forces uncomfortable conversations with banks, and creates tension between finance teams trying to preserve cash and procurement teams trying to secure supply. Most available content on working capital is generic or bank-oriented and doesn’t show simple, kraft-paper-specific scenarios converters can copy.
What’s needed is a shared view of the problem and a practical toolkit that both functions can use together. That’s where this checklist comes in.
Why Finance and Procurement Need a Shared Framework
Inside a typical SME packaging converter, finance and procurement feel the same strain from different angles. Finance watches overdraft limits, interest costs, and bank covenants, worrying about how to pay next week’s paper bills. Procurement watches supply security, reel availability, prices, and supplier relationships, worrying about how to keep the mill loading trucks even when customers pay late.
Without a common language and agreed priorities, these conversations become circular and defensive. The checklist below breaks working capital actions into three categories: finance-led moves, procurement-led moves, and joint experiments. This structure acknowledges that both functions have different levers they control while emphasizing that the biggest impact comes from coordinated action.
Before diving into the checklist, it helps to understand what you’re measuring. The cash conversion cycle shows how many days cash is locked between paying suppliers and collecting from customers. For a typical SME converter buying kraft paper:
- Supplier payment terms: 30–60 days
- Inventory holding period: 15–30 days
- Customer payment terms: 60–90 days
The Cash Conversion Cycle (CCC) measures how long cash is tied up. In simple terms, you calculate the funding gap by adding your Days Inventory Outstanding (DIO) and Days Sales Outstanding (DSO) and subtracting your Days Payables Outstanding (DPO)—this difference shows the days your cash is locked up. A converter paying suppliers in 45 days, holding inventory for 20 days, and collecting from customers in 75 days has a funding gap of negative 10 days. That means working capital is under strain because cash goes out before it comes back in.
How to Use This Checklist in Practice
Treat this checklist as a working document, not a performance review. Aim for a short, focused meeting of 30–45 minutes with:
- The finance head or CFO-equivalent
- The kraft paper procurement or sourcing lead
- Optionally, a plant or operations representative who understands scheduling and stock-outs
Print this checklist and bring it to your planning meeting. Start by having finance and procurement each review their respective sections independently for 10 minutes, noting which actions feel immediately feasible and which need more discussion.
Then come together to prioritize. You don’t need to execute every item. Focus on 2–3 finance-led actions, 2–3 procurement-led actions, and 1–2 joint experiments over the next 30–60 days. The goal is momentum, not perfection.
Make it explicit in the meeting: “This checklist is here to turn strain into a shared plan. It’s not about scoring departments or individuals.”
As you work through the checklist, keep these principles in mind:
Frame supplier conversations as partnership opportunities, not demands. Kraft paper mills understand cash flow challenges and many have seen converters face similar pressures. Approaching the conversation as “We’re growing and want to plan our working capital better” opens more doors than “We need longer terms or we’ll find another supplier.”
Start with low-risk tests rather than committing to large changes. A trial with a secondary supplier or a discount experiment with a single customer provides data without exposing the business to major relationship or operational risks.
Document everything clearly and simply. The owner or managing director may need to present the working capital story to a bank. Having clear numbers and a logical action plan significantly strengthens that conversation.
The Alignment Checklist: Finance-Led, Procurement-Led, and Joint Actions
This checklist is designed to be printed, shared internally, and used in a focused meeting. Each action includes space to note who owns it and target timelines.
Finance-Led Actions
These are moves finance can initiate or lead without requiring supplier negotiation. Finance’s first job is to make the cash story so simple that procurement and the owner can see it in five minutes.
Map the current cash conversion cycle
Calculate exact days for supplier payment, inventory holding, and customer collection. Use the most recent three months of data. This creates a baseline everyone can reference. Assemble a one-page view that covers supplier payment terms for main kraft paper suppliers, typical inventory days for key kraft grades, and customer payment terms for the biggest buyers.
Owner: ___________ Timeline: ___________
Identify the top five customers by volume and their payment patterns
Which customers consistently pay on time? Which ones stretch terms? Knowing this helps prioritize where to focus collection efforts or payment term discussions.
Owner: ___________ Timeline: ___________
Review overdraft usage over the past six months
Flag the weeks when the overdraft peaked. Mark the 2–3 times in the last year when overdraft use came dangerously close to the limit and note what triggered each spike—large order, delayed customer, seasonal pattern. Documenting the pattern makes it easier to explain working capital needs to banks or to plan inventory purchases differently.
Owner: ___________ Timeline: ___________
Estimate the cost of the current working capital gap
Calculate overdraft interest or opportunity cost of locked cash. A simple formula: (average overdraft balance) × (annual interest rate) ÷ 12. This quantifies the problem in terms owners and banks understand.
Owner: ___________ Timeline: ___________
Prepare a one-page cash flow summary for internal use
Show cash in, cash out, and the gap for a typical month. Include kraft paper purchases as a separate line. List the main bank constraints that matter for supplier and customer conversations—such as limits you cannot cross without approvals, minimum balances, and any covenants that restrict additional borrowing. This document becomes the foundation for conversations with procurement, suppliers, and banks.
Owner: ___________ Timeline: ___________
Procurement-Led Actions
These are moves procurement can explore or test without committing finance to new terms immediately. Procurement’s role is to show what is realistically negotiable without risking stock-outs or damaging critical supplier relationships.
List current kraft paper suppliers and their standard payment terms
Document what each supplier offers as standard and whether they’ve ever mentioned flexibility. Identify the 3–5 core kraft paper suppliers and summarize current payment terms, how strictly they are enforced, reliability on deliveries and quality, and how dependent the plant is on each supplier or grade. Some mills offer early payment discounts or extended terms for larger volumes that procurement may not have formalized.
Owner: ___________ Timeline: ___________
Identify one or two mills willing to discuss payment term experiments
Reach out informally to gauge openness. Note pockets of existing flexibility: suppliers who already allow occasional delays or partial payments, any informal understanding about a few extra days when large orders hit, or distributors who have been open to slightly different terms in the past. Frame it as a planning conversation, not a demand. Mills with excess capacity or newer market entrants are often more flexible than established players.
Owner: ___________ Timeline: ___________
Calculate the volume at which better terms might be feasible
If the converter could commit to a quarterly minimum order, would that justify 60-day terms instead of 30? Knowing the threshold helps procurement assess whether consolidating volume makes financial sense.
Owner: ___________ Timeline: ___________
Document any early payment discount opportunities
Some suppliers offer 1–2% discounts for payment within 15 days. If finance has temporary cash availability, capturing these discounts can be more valuable than extending terms. Share these with finance to evaluate.
Owner: ___________ Timeline: ___________
Review inventory holding patterns by grade
Are certain kraft paper grades held longer than others? Understanding this helps align ordering frequency with actual usage rates, potentially freeing up cash without risking stockouts.
Owner: ___________ Timeline: ___________
Joint Actions (Finance and Procurement Together)
These require coordination and shared decision-making. Once both sides have worked through their part of the checklist, the real work is choosing a few joint actions that feel like low-risk experiments, not permanent commitments.
Run a joint scenario: What if inventory dropped by 20%?
Model the working capital impact of ordering more frequently with smaller batch sizes. Include the trade-off of potential freight cost increases. This exercise often reveals that modest inventory reductions have significant cash benefits.
Owner (Finance): ___________ Owner (Procurement): ___________ Timeline: ___________
Test one small payment term experiment with a secondary supplier
Choose a mill that represents less than 10% of volume. Start with suppliers where the relationship is strong and even a modest shift in terms (7–15 extra days) would noticeably reduce overdraft pressure. Propose extending payment from 30 to 45 days on a trial basis for one quarter, or explore aligning due dates with known customer payment cycles. Consider asking for slightly longer credit in exchange for a committed minimum monthly volume, or exploring a two-tier structure with standard terms and occasional extended terms for large, seasonal orders. Document the impact on cash flow and the supplier relationship. Use this as proof of concept before approaching larger mills.
Owner (Finance): ___________ Owner (Procurement): ___________ Timeline: ___________
Align on which customers to approach for accelerated payments
Select 2–3 customers with strong relationships. In many converters, a handful of large customers drive most of the receivables and the cash gap. Explore earlier part-payments (20–30% on dispatch), small discounts (0.5–1%) for payment within 45 days instead of 60–75 days where margins allow, or clearer agreed payment schedules instead of irregular lumps. Calculate whether the discount is cheaper than overdraft interest.
Owner (Finance): ___________ Owner (Procurement): ___________ Timeline: ___________
Make one small, safe change in inventory policy
Together with operations, choose an adjustment that doesn’t risk production stoppages and can be reversed if it doesn’t work. Typical options include trimming days of stock on a non-critical grade where there are reliable alternatives, synchronizing kraft paper ordering cycles more tightly with known customer demand patterns, or avoiding unnecessary comfort stock on slow-moving grades.
Owner (Finance): ___________ Owner (Procurement): ___________ Timeline: ___________
Set tracking measures and follow-up rhythm
Agree how progress will be tracked and who will own it. Keep it simple with one or two measures such as average overdraft usage this month versus last quarter and approximate cash gap in days. Schedule short follow-up meetings (30-day and 60-day review checkpoints) to assess what worked, what didn’t, and what to adjust. Regular reviews turn the checklist into a living process rather than a one-time event. Capture these decisions directly on the printed checklist or in a one-page summary.
Owner (Finance): ___________ Owner (Procurement): ___________ Timeline: ___________
Sharing This Checklist With Owners and Leadership
Many finance heads and procurement leads will want to share this checklist with owners or other leaders who weren’t in the first meeting. A short, clear email helps frame the conversation.
Sample Email Template (Edit to Fit Your Voice):
Subject: Simple checklist to reduce kraft paper working capital strain
We’ve been feeling the strain from supplier and customer payment terms in our kraft paper business. The attached checklist from PaperIndex gives us a simple way for finance and procurement to see the same cash picture and agree on 2–3 small, realistic moves for the next quarter. Let’s spend 30 minutes walking through it and circling the items that will make the biggest difference without disrupting supply.
Practical Sharing Steps:
- Attach a one-page version of the checklist (as a PDF or slide with space for notes and owners)
- Include a link to the hub article for colleagues who need more background on working capital strain from payment terms
- For team members who want to dive deeper into kraft paper working capital topics over time, point them to PaperIndex Academy
- Add a calendar invite for a short follow-up review after about 90 days. In that session, the group can mark which experiments helped, which stalled, and what to adjust next.
What Happens After the First 60 Days
Most converters find that even small adjustments create noticeable relief. Extending terms with one or two suppliers by 15 days, reducing inventory by 10–15%, or accelerating payment from two key customers can collectively shift the cash conversion cycle by 10–20 days. That often means the difference between constant overdraft stress and a manageable rhythm.
After the initial 60-day period, review the results together. Did the supplier relationship hold up well? Did inventory reductions cause any stockouts? Did customers respond positively to early payment discounts? Use this feedback to refine your next set of actions.
Over time, the checklist becomes a tool for continuous improvement rather than crisis management. As your business grows, revisit the framework every quarter to ensure payment terms, inventory levels, and financing remain aligned with your actual scale and customer mix.
Resources and Next Steps
Once finance and procurement have a basic shared plan, different teams may want to deepen specific levers:
To sharpen the picture of the cash gap and its timing:
Revisit the hub article on seeing and fixing the kraft paper cash flow gap and explore the spoke on creating a beginner’s cash conversion cycle map for kraft paper buyers.
To work more deeply on stock levels:
Turn to the spoke on inventory days, overdraft stress, and how much cash is stuck in kraft paper.
To prepare for bank conversations:
Use the spoke on estimating how much working capital limit you need for kraft paper as a guide when calculating formal working capital support requirements.
For broader industry education:
The PaperIndex Academy offers additional resources on kraft paper procurement, international trading, and supply chain management.
Final Thoughts
Aligning finance and procurement around a few small moves is often enough to turn constant firefighting into a more predictable rhythm. You can always refine the checklist as you learn what works. The key is starting with shared visibility, agreed priorities, and a commitment to test rather than argue.
Working capital strain doesn’t resolve overnight, but treating payment terms and inventory as design levers rather than fixed constraints gives you more control than you might expect. Most SME converters discover that the path to calmer month-ends starts with a 30-minute conversation and a simple checklist both teams can own together.
Disclaimer: This article provides general educational guidance on working capital management for packaging converters. It is not professional financial advice. Companies should adapt these concepts to their specific context and consult qualified financial professionals before making significant changes to payment terms, financing arrangements, or supplier relationships.
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