Finance & AccountingFree
Vendor Payment Prioritization and Cash Memo
Every payable ranked by what happens if it goes unpaid, with the release amount that keeps each vendor shipping and the reasoning to hand the owner.
River's payment memo reads the AP aging and your vendor terms, then produces the week's run: who gets paid, how much, and what each payment buys. Withheld payroll taxes come out before anything is ranked, because they are not a payable. Every remaining vendor carries its release amount rather than its balance, since the number that keeps a supplier shipping is rarely the number on the invoice. The memo behind it is the argument you hand the owner.
Ranking by operational consequence is what every crisis playbook on this query already tells you to do. The item that ends careers is not on the aging report at all. Trust fund taxes carry a penalty of 100 percent of the unpaid tax, personally, against anyone who signs checks or can cause the spending of business funds. Knowing the deposit is not being made while directing other payments is what willful means. So the taxes are a gate, not a tier.
Written for the controller or owner sitting down on Thursday with less cash than the run needs. It takes the week's opening balance straight from the 13 week cash flow forecast, and the deferrals it produces go back in as the following weeks' outflows. Bank data arrives through bank statement PDFs, the aging comes off the normalized trial balance, and a deferral large enough to move a ratio gets checked against the covenant headroom forecast.
A skipped discount is a 37 percent loan
Nobody on page one prices the discount, and it is usually the cheapest decision in the week. Skipping 2/10 net 30 to hold the cash twenty extra days costs 37.2 percent a year, which is worse than any revolver in the room. Skipping half a percent on net 60 costs 3.7 percent, which is cheaper than borrowing. Same instinct, opposite answers, and the aging report shows neither. In the worked example the run pays one and lets the other go.
What you pay for matters as much as who you pay. A payment on an old balance made while insolvent is recoverable by a trustee for 90 days, and for a full year where the creditor is an insider. A payment that is a contemporaneous exchange for new value is not. So a cheque covering this week's delivery sits on different ground from a cheque clearing last quarter's arrears, and the affiliate management fee sits on the worst ground of all.
The third thing the aging cannot tell you is how much a vendor actually needs. A supplier on credit hold releases at a balance, not at zero, so 17,800 against a 47,800 account gets the coatings moving while a pro rata split of the same cash gets nothing moving. Freight releases on the two oldest invoices. Every line carries the amount that changes the vendor's behaviour, and the difference funds the rest of the run.
How it works
Add the aging
Paste the AP aging or the payables export, however your system prints it.
Say what is available
The cash you can actually deploy this week, after payroll and anything already committed.
River builds the run
Taxes gate out, discounts get priced, and every vendor gets the amount that releases them.
Make the calls
Work the deferral list before Friday, with the specific ask already written for each vendor.
What you get
- Withheld payroll taxes gated out of the run before any vendor is ranked at all
- Each early payment discount converted to an annual rate and set against your cost of money
- A release amount on every vendor, being what it takes to keep them shipping
- Payments for new value separated from payments clearing arrears, with insiders called out
- The calls to make this week, with what to ask each vendor for and by when
- A memo carrying the reasoning, so the run survives the conversation with the owner
Common questions
Why do payroll taxes come out before the ranking rather than at the top of it?
Because they are not the company's money and the consequence is not the company's either. The penalty runs to 100 percent of the unpaid tax, assessed against individuals rather than the business, and it reaches anyone who signs cheques or can direct spending. Ranking them alongside vendors invites a trade nobody should make.
Does paying a supplier while cash is tight create a problem later?
It depends entirely on what the payment is for. Money for goods arriving this week is a contemporaneous exchange for new value and stands up. Money clearing an old balance while insolvent is exposed for 90 days, and for a year where the payee is an affiliate or an owner. The run separates them.
How is the discount decision different from just paying early?
It is a borrowing decision with a rate attached. Two percent for twenty days is 37.2 percent a year, so skipping it is more expensive than any facility you hold. Half a percent for fifty days is 3.7 percent, so skipping it is cheaper than borrowing. Both look identical on an aging report. Every leg of the cycle gets priced this way in the cash conversion cycle analysis.
What is a release amount and where does it come from?
It is the smallest payment that changes what the vendor does. A credit hold clears at a stated balance, a carrier releases a load against named invoices, a lease has a cure period with days left on it. You supply what you know and River asks about the rest, then the run is built from those numbers.
Can I run this every week?
That is the intended use, and the deferral list is what makes it compound. Each week's deferrals become the next week's obligations with a promised date attached, so a vendor who agreed to 10 April appears on the 9 April run rather than resurfacing as a surprise. The pattern across weeks is its own signal. Commitments owed to you rather than by you sit in the AR collections pack.
What do I give the owner?
A memo carrying the run, the reasoning behind each line, and the exposures avoided, alongside the deferral list with its calls. It reads as a decision rather than a spreadsheet, which matters when the question is why the affiliate did not get paid. The forecast underneath it is the 13 week cash view.
Vendor Payment Prioritization and Cash Memo
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