Chances are, customers are taking longer to pay these days. No reason that should mess with your company’s cash flow.
Maybe it’s a few extra days; maybe it’s even more. But if your customers are giving you the old payment stretch, you’ll want to give this strategy some serious consideration:
Hopefully, some of those slower-paying customers gave you the courtesy of a little advance notice — or even asked you — before extending your regular terms.
That’s just what you may want to do with your own suppliers.
Think about approaching some key vendors to see if they’d temporarily extend your own payment terms until the economy picks up, along with your own customers’ payments.
Note: If there are some suppliers where you know this will be a nonstarter, don’t even bother.
This is one case where it’s better to ask permission than forgiveness. If you choose to just stretch payments, then have to deal with Credit and Collections, you probably won’t get cut much slack.
You know all too well that Credit folks’ bonuses often ride on the amount of accounts that are current. Most won’t want to jeopardize that to cut you a break. But if your terms were changed on the front end, technically you’ll still be paying on time, even if you’re enjoying an extra 10 or 15 days.
The companies that have tried it report they’ve gotten about 90% of their suppliers to agree to temporarily extended terms.
And that should keep your A/P and A/R agings more balanced.