Updated February 2026 | Production execution
A US e-commerce brand was manufacturing a home gadget in China. Plastic parts, simple electronics, retail packaging. Tight season deadline. Already under pressure to get inventory in.
The factory wanted early balance payment.
"Trust us, we're finished."
"We need to book the container now."
"Your goods are ready."
The client was tempted.
They tried to ship early, before final QC.
Not because they were ahead of schedule.
Because they were behind — and hiding it.
They had a production problem mid-way:
And instead of stopping and fixing it properly…
They tried to ship fast and pray.
Because once goods are on the water:
We had structured payment as:
The factory pushed hard to collapse the final 50% into "before shipment" or "trust payment."
We refused.
The rule was simple:
No inspection. No load.
And: No balance payment until passed inspection.
We sent QC for final inspection before authorizing the 50% release.
What QC found:
The key detail:
The factory had already packed most cartons.
Meaning: they were ready to load it and disappear behind paperwork.
First response:
"This is normal. You are too strict."
Then:
"This is not a real problem. Customers won't notice."
Then:
"We can give you discount next order."
Then:
"If you don't pay today, shipment will be delayed and it's your responsibility."
Classic escalation ladder.
Because the client had not paid the 50% balance yet, we had leverage.
And we used it like this:
No debate. No emotional conversation.
Just:
Factories love "sorting" because:
We refused sorting.
We demanded:
We required written commitment that:
Two days later the tone changed completely.
Suddenly:
Funny how that happens when money is still on the table.
They reworked the order.
We re-inspected.
The shipment passed.
The client got the goods before the season, not after.
If that shipment had landed:
The balance payment was large enough that the factory had to fix it.
If it was already paid:
Because payment leverage forced speed.
Factories can delay forever when they already have your money.
When they don't, suddenly:
They have four reasons:
1) Cash flow
Most China factories operate on thin margins. They want your money to fund operations or pay their own suppliers.
2) Risk transfer
Once they have full payment, quality problems become your problem. Rework becomes negotiation. Speed becomes optional.
3) Leverage elimination
As long as you hold payment, you control the timeline. Once payment clears, they control everything.
4) Problem hiding
If they know there's a quality issue, early payment lets them ship before you find out.
Standard China terms (the trap):
This gives you almost no leverage. By the time you see the goods, the factory has 100% of your money.
Milestone structure (basic control):
This ties payment to performance. But factories resist it.
Inspection-gated structure (full control):
This is what we used. It keeps the largest payment tied to quality verification.
The critical rule:
No inspection pass = no final payment = no loading permission.
Without that, you're just hoping.
Scenario 1: You pay early, inspection fails
Factory response: "Sorry, too late. Goods already shipped. We can give small discount next time."
Your options: Accept bad goods or fight for refund (good luck).
Scenario 2: You pay early, factory delays
Factory response: "Material shortage. Container delay. Port congestion."
Your options: Wait. Complain. Wait more.
Scenario 3: You pay early, quality collapses
Factory response: "This is normal quality. You didn't complain before."
Your options: Eat the cost or destroy your supplier relationship fighting.
In all three scenarios, you lost control the moment payment cleared.
Payment terms tied to verification:
Not trust. Not relationship. Verification.
Inspection before final payment:
Third-party QC or your own team. But it happens before the 40-50% balance clears.
Written quality gates in contracts:
"Final payment release is conditional on inspection pass per AQL standard [X]. Failed inspection = rework at supplier cost + re-inspection."
No exceptions for "trusted" suppliers:
The suppliers you trust the most are often the ones who abuse trust the hardest.
Enforcement discipline:
If inspection fails, you freeze payment. No debate. No emotion. Just process.
Payment discipline is not "being difficult."
It's basic survival.
Because in China, the factory's incentive is simple:
If they can ship and get paid, they will.
Even if the goods are wrong.
And once the money is gone, your leverage is gone.
Payment terms are not negotiation tactics.
They're your last line of defense before bad goods land in your warehouse.
Q: Won't strict payment terms damage my supplier relationship?
No. Professional factories expect milestone payments tied to performance. The ones who push back hard are usually the ones hiding problems. Strong payment terms filter out weak suppliers.
Q: What if the factory refuses milestone payment terms?
That's a red flag. Professional manufacturers understand buyer risk. If they won't accept inspection-gated payment, they're either cash-starved or planning to cut corners. Find a different supplier.
Q: How do I enforce "no inspection, no load" if I'm not in China?
You need someone on the ground. Third-party QC, a local agent, or your own team. Remote "trust me" inspections don't work. The factory needs to know someone will physically block loading if goods fail.
Q: What's a reasonable final payment percentage?
40-50% against BL after inspection pass. We typically structure as 20% deposit, 30% at pre-production, 50% after inspection. Enough leverage to force accountability, but fair enough that professional factories accept it.