How they do it: Computer manufacturer Dell was one of the pioneers in employing a build-to-order strategy in the 1980s. Computers were first customized and paid for by the customers, with invoices for the computer parts from the suppliers having lenghier payment deadlines. This allowed it to achieve a highly negative cash conversion cycle. In its early years the Cash Machine pattern presented an important means for Dell to finance its growth. At its founding in 1984, Michael Dell’s seed capital consisted of a mere US $1,000.
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How they do it: When a merchant accepts a payment via PayPal (e.g. for his E-Commerce shop), the funds are first collected from the customer’s PayPal balance or credit card. Only after PayPal asserted that the payment is genuine and it received the funds from the customer, the payment is ”deposited” virtually in the merchant’s account. Subsequently, the merchant may then transfer the funds to his regular bank account. Both merchant and customer balances lead to PayPal holding an immense amount of funds ”virtually” on his platform, before the funds are at a later stage liquidated or transferred away from the platform.
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How they do it: Groupon’s customers typically pay for a voucher or coupon upfront directly to Groupon. This voucher or coupon can then be used to get a product or service with the merchant. Upon delivering the service or product, the business gets paid by Groupon.
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How they do it: Blacksock’s subscribers purchase and pay their sock subscription in advance, allowing the company to use the increased liquidity to finance other areas such as growth.
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