I hope that you have enjoyed the article “Assess Supplier Financial Risk Now!“
Certainly the global credit crunch has caused a lot of concern about the viability of supply chains. 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. I know that we don’t. Are there a significant number of suppliers that would go out of business without that credit lifeline? It’s a scary question.
I think that, if nothing else, the payment stream within the supply chain is going to be unsettled for some time. Because if businesses rely on lines of credit and no longer have access to those lines, then they won’t pay their invoices in anything close to a timely manner. And if their suppliers aren’t getting paid, they will likely have to stretch out their payments to their suppliers. And their suppliers…you get the picture.
The concern I have with this likely cascade is the risk that Purchasing, Finance, and Accounts Payable won’t be on the same page. OK, so Finance mandates that invoice payments will be made in 60 days rather than 45. That is a decision that should not be made without Purchasing’s involvement.
What if this unilateral extension of payment terms ticks off a strategic supplier who gives priority to another customer? Continuity of supply of a strategic good or service could be disrupted for you.
So if your organization is forced to let accounts payable build up a bit in order to survive, make sure it is done carefully and give priority to paying those suppliers that you can’t afford to tick off.
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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