Executive Briefings

The New Normal: Big Companies Paying Their Bills Late, Later and Latest

When economic hard times hit in 2007-2008, CFOs and finance departments felt pressure to improve their organizations' working capital positions. The longer companies could hold on to cash, the more liquid they were, and the safer they felt. Paying bills quickly meant dipping into cash reserves, possibly taking away money from new-product development, mergers and acquisitions, marketing, or anything else that might drive top-line revenue. It was either that or be forced to rely for growth on expensive external financing. Everyone knew that when it came to days payable outstanding, longer was better.

However, before the recession, many companies were reluctant to embark on payment-term extension programs for fear of disrupting their supply chains, losing suppliers, or forcing them to raise their prices. But in the face of what looked like economic Armageddon, such considerations seemed less compelling than bolstering working capital. Therefore, many large companies began telling suppliers (especially the smaller ones providing non-core or indirect goods and services) that payment schedules would be extended from 30 days to 45 days, or from 60 days to 90 days, and sometimes beyond.

To their surprise, it worked.

Read Full Article


Keywords: supply chain management, value chain, supplier payment schedules, invoice management

However, before the recession, many companies were reluctant to embark on payment-term extension programs for fear of disrupting their supply chains, losing suppliers, or forcing them to raise their prices. But in the face of what looked like economic Armageddon, such considerations seemed less compelling than bolstering working capital. Therefore, many large companies began telling suppliers (especially the smaller ones providing non-core or indirect goods and services) that payment schedules would be extended from 30 days to 45 days, or from 60 days to 90 days, and sometimes beyond.

To their surprise, it worked.

Read Full Article


Keywords: supply chain management, value chain, supplier payment schedules, invoice management