You know those bigger companies in your customer database? They could be becoming a bigger pain in the you-know-what.
A pain in the wallet, that is.
If you have large companies as customers, you’ll want to guard against this potentially cash-flow-crunching situation:
Big customers that try to call the shots with regard to payment terms.
And (little surprise here) they’re not terms most favorable to your company.
It’s a rising trend that’s being noticed by many of your peers in Finance.
Aside from the continuing shaky economy and the slow pays that accompany it, large customers dictating increasingly unattractive terms is the top concern of credit professionals heading into 2010.
That’s the word from a recent survey by the National Association of Credit Management (NACM).
It’s a tough call: Your business certainly doesn’t want to risk losing the big fish, but you don’t want your own cash flow compromised to do it, either.
Now’s the time to huddle with finance execs and other members of your senior team to determine how far you’re willing to bend and where your breaking point is, terms-wise.
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Tags: cash flow, customers, payment terms
December 24th, 2009 at 6:22 pm
OK. i’ve been in business for 32 years. Once in Cabinets and Store Fixtures, the other is computers. I’ve seen both sides of this problem as the vendor and as the programmer supporting the AP side.
With the advent of computers things get impersonal but in times like these relationships count, a box a candy for the AP team, you bet because the poor person sifting through 1,000 invoices per month response would be easily improved with a small treat.
The sales people and purchasers are very disconnected and I know that AP managers will put the squezze out to the smaller vendors.
If you supply a product and discount a line of goods, perhaps using that a chip to get better payment terms.
For 30 years I’ve watched this game play out but for the most part the bigger they are the more like they pay promptly and I’ve always had good luck in getting paid. My invoices are under 100K and yes they’re plently out there that will take your business but dont extend credit beyond what you can afford to lose.
I’ve seen company after company extend terms, borrow against their house but only to see their business collapse, then see them lose their homes, families and property. I’ve seen this well over 100 times so never trust them, when you here that word – RUN.
Want to give credit, do you have a good credit policy? Can you run their credit report when needed, are you sure they are in good financial health.
Here is how I learned my lesson that saved me over 50K in 1986. A contractor wanted terms on a 30K project for cabinets, i just started running credit reports back then. The report came back with leins, judgements and late pays. I told them no credit, cash up front, we started fabing early, the check didn’t come and I called the owner of the business not the GC, told him we’ve stopped work because the check was late. The next day it was there, then we delivered the goods, three trucks 10 employees to unload. I couldn’t go, so I told my crew if a check for 15K wasn’t in your hands nothing came off the truck and anyone who made a mistake by offloading would be fired.
These guys were so bad that they tried to take the cabinets off of our trucks. We stood our ground, we forced them to get a cashiers check and made them pay for the standby time as well.
Then a year later we passed on a project with similar charactristics. I let a competitor take the deal, a year later he was out 150K, and bankrupt.
Just because it’s a big client, project or customer doesn’t mean its a good all the time as I finished installing a bar for 30K, a week later instead of seeing the check, i got the bankruptcy petition along with all the other suppliers, a year later the owner was in jail for taking employer taxes to the tune of 500K.
Trust everyone but verify them first.