Earlier this week, I posted about the affect of the global credit crisis on the supply chain. I wrote: “According to the news, at least, many companies rely on lines of credit to meet operating expenses. I wish I knew what percentage of businesses fall into this category…Are there a significant number of suppliers that would go out of business without that credit lifeline?”
At the time, I was feeling that if a company has to rely on credit to sustain itself, maybe it shouldn’t be in business. And I still feel that a well-managed company generally should have enough of its own cash to meet short-term needs and not try to live beyond its means.
But I had a meeting last night with several executives from the local chamber of commerce and one of its committees. Our discussions naturally turned to the economy. So I brought up the question about whether there are a lot of companies that rely on credit.
To my surprise, one of the execs who owns her own company said that her company does rely on credit to meet payroll and operating expenses. She said that they have to because their customers – mostly government agencies – often are six months late with their payments and the situation is getting worse as many government agencies are near financial insolvency (according to her observations).
So, yes, the availability of credit is hurting the economy. But so are slow paying customers. Are you, as a buyer, a slow paying customer?
If so, you could be hurting the economy and killing your suppliers.
Are there some suppliers that you can’t afford to kill?
If so, you may want to make sure they are the ones who get paid a little sooner than others. Don’t leave it to Finance or Accounts Payable to make those decisions.
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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