The RFQ Field That Makes Battery Pack Payment Terms Comparable

The payment terms field that makes battery pack bids comparable is a required schedule, not a comment box. The RFQ asks every supplier to break its terms into a dated table: deposit, each milestone, the credit period on the balance, the currency, and whether each payment is refundable or creditable against production. The buyer then converts each returned table into a cumulative cash-outflow curve and scores that curve on the weighted evaluation sheet, next to unit price, quality, and capacity. Once terms are expressed as curves instead of sentences, payment stops being a commercial side conversation and becomes a number you can rank.

I built the first version of that table because I got tired of losing the same argument in evaluation meetings. Three bid packages open on the table, unit prices within four percent of each other, and three payment proposals that could not be read against one another. One supplier wanted a third down with the balance before shipment. One wanted nothing down and net 45 from bill of lading. One wanted a tooling payment up front plus progress payments tied to a build schedule I could not verify. Everybody in the room had a different opinion about which was better, and every opinion was really about which risk the person holding it cared about most.

That is the thing I keep coming back to. Payment terms are not hard to compare because suppliers are evasive. They are hard to compare because a payment schedule is a shape, and people argue about shapes in prose. Put the shape on a timeline and the argument mostly evaporates.

What the field actually asks for

The field is a table the supplier has to fill in, one row per payment event. I do not ask for a paragraph describing their standard terms, because I will get a paragraph describing their standard terms and it will say "negotiable." I ask for rows with these columns:

• The trigger. Not "on order" but the specific event: PO issuance, drawing freeze, cell purchase order placement, FAT pass, FAT plus 30 days, shipment, arrival at destination port, acceptance, end of credit period.
• The percentage of order value due at that trigger.
• The basis, because tooling and NRE often sit outside the pack price and follow their own schedule.
• Days from the trigger, since a trigger plus 45 days is a different date than the trigger itself.
• Currency.
• Refundable, creditable against the first production order, or neither.
• Free-text conditions.

That last set of columns is where most RFQs lose the plot. A supplier will happily tell you 30 percent deposit and 70 percent before shipment. What they will not volunteer is whether the deposit is creditable if the program is cancelled at drawing freeze, or whether the tooling payment converts into a credit on unit one. Those answers exist inside the supplier. If the field does not demand them, they stay inside the supplier and surface at the worst possible moment.

The rule I put at the top of the section: an incomplete schedule is scored as the worst case in the anchor set, not as a missing data point to follow up later. You would be surprised how quickly tables come back filled in when that sentence is in the RFQ.

Turning three schedules into one chart

Here is the mechanical part, and it is genuinely mechanical. Take each returned schedule, anchor every row to a date using the bid's own stated lead time, multiply by the order value, and sum cumulatively from PO date to final payment.

Three rows of numbers become three curves. One starts steep and flattens early, because the supplier wants cash before any metal is cut. One stays near zero for months and then jumps at shipment. One rises in tidy steps. They all end at roughly the same total, and they look nothing alike in between.

Two numbers fall out of that curve, and those are the only two I score:

Peak cash exposure, expressed as a percentage of order value. How deep into your working capital does this supplier pull you at the worst point.

Days of cash outstanding, which is the area under the curve divided by order value. A rough measure of how long your money sits in their hands before you have packs in your warehouse.

I used to try to run a discounted cash flow on these and stop there. I stopped. The discount rate becomes its own fight, and the ranking rarely changes in the range anyone would actually agree on. Area under the curve is transparent, it does not require a rate assumption, and a supplier can reproduce it from their own numbers. When a supplier disputes a score, I want them disputing the same arithmetic I did, not my cost of capital.

One adjustment worth making: if the credit period is counted from bill of lading rather than arrival, the transit time is a payment term in disguise. Ocean freight can sit in that gap for weeks. I normalize both bids to the arrival date and note it, because suppliers who quote from bill of lading are not being sneaky, they are just using their own convention.

Where the score comes from

Payment terms get their own weighted category on the evaluation sheet, with anchors written before any bid is opened. Something in the range of ten to fifteen points out of a hundred is where I usually land, sitting alongside cost, quality, capacity, and compliance. I have run it higher and regretted it, because payment terms are a financing consideration, not a product consideration, and overweighting them can push you toward a supplier with generous terms and thin engineering.

The anchors are what make it defensible. A five means no payment before FAT pass and no exposure above a small fraction of order value at any point. A three means some payment before FAT but a meaningful credit period after shipment. A one means the majority of the money leaves before the first pack is tested. Written down, in advance, in the RFQ itself, so suppliers know the shape of a good answer without knowing the other bids.

Do not skip the obvious companion step: read the payment score next to whatever financial-health information you have. A long credit period from a supplier with a fragile balance sheet is not favorable terms. It is an unsecured loan you did not intend to make.

The conditions that change the answer

A single schedule is not enough, and this is the part most RFQs miss. Payment terms are conditional, and the conditions are exactly the variables you are already negotiating.

Ask for the schedule at three volumes. Small volume, mid volume, and your forecast volume. Suppliers reprice terms at volume thresholds because their own cell purchases and material commitments change with it.

Ask for the schedule under both tooling arrangements. Tooling owned by you and tooling owned by the supplier are different deals with different payment logic, and the deposit percentage often moves with it.

Ask for the schedule under both cell sourcing paths. Cells consigned by you versus cells sourced by the supplier changes how much working capital they are carrying on your behalf, and their terms will reflect it once you make them say so out loud.

And ask, as a plain question rather than a contract term, whether any milestone payment is refundable, creditable against production orders, or neither. That one belongs in the RFQ because the answer is comparability data. What you do with the answer is a legal question, and that is where counsel takes it.

What I stopped doing

I stopped asking for "your best payment terms" as a single line. It produces a single line.

I stopped accepting terms quoted in different currencies without a stated position on who carries the exchange exposure, because a bid denominated in euros with a long credit period carries a cost the price column does not show.

I stopped letting Incoterms hide inside the payment schedule. FOB and DDP shift who pays freight and when title moves, but they do not move the milestone dates, and suppliers sometimes let the two blur together. I make the schedule dates explicit and keep the delivery term in its own field.

What is left is a column that behaves like the rest of the evaluation. Two bids, two curves, one score. When the meeting comes, nobody has to argue about whose terms are friendlier. You point at the chart and you point at the anchor and the conversation moves to what actually deserves the time.