The Lemon Fool

We have just received notification from one of our customers that they will be changing their payment terms to all suppliers from 60 days to 120 days.

They went previously from 30 days to 60 days about 5 years ago and we accepted. We have initially declined their most recent kind offer.

This is a multinational making multi billion pounds of profit per year and rising so it sticks in the craw just a bit that they now wish to squeeze a little more juice from their small suppliers.

We are minded to tell them where they can stuff their terms but is that just cutting off our noses...

Hi John,

Galling I know, but from a business perspective...

What will it cost you to lose them compared to what it will cost you to shoulder the debt?

I thought there were rules against such sharp practice - brought in by Tony Blair’s government I believe

https://www.gov.uk/late-commercial-paym ... t-recovery

But I see that they won’t apply if you agree to be shafted…

Charge different prices depending on the payment terms. The longer they are the more you charge.

Offer a small discount for payment in advance

redsturgeon wrote:We have just received notification from one of our customers that they will be changing their payment terms to all suppliers from 60 days to 120 days.
This is a multinational making multi billion pounds of profit per year and rising so it sticks in the craw just a bit that they now wish to squeeze a little more juice from their small suppliers.

I worked for an American multinational in the noughties, who decided to move from 30 to 90 days. The local UK management who were in regular touch with their small suppliers were not at all happy, but had to apply company policy.
As I recall, most of the small suppliers sucked it up, but it does nothing for relationships if the buyer suddenly needs a favour.

I guess you have to accept it, unless you have other customers who could take up the slack in which case you can gleefully decline.

V8

Thanks for the responses.

Mrs RS decided in unilaterally to politely decline the offer and said we are happy to continue working on our present terms or we will levy a surcharge on any payment beyond 60 days.

John

Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

If they cannot afford to finance their business and are now asking you to do so for them do you want to trust the longevity of their ability to pay their bills regardless of how big they are?

Shoot the hostage

kempiejon wrote:

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

If they cannot afford to finance their business and are now asking you to do so for them do you want to trust the longevity of their ability to pay their bills regardless of how big they are?

I wish I could tell you who this company is...you would be shocked.

As Jason Manford once said

'I can't tell you the name of the company, but lets just say its a very large British gas company.'

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

That doesn't sound good. I would have thought a company that size would want a standard across all their suppliers, makes processing invoices so much easier. So either they're going to try and change again in 12 months, or they're scrabbling for cashflow and it is a corporate decision to try and move some debt on to their suppliers.

As an aside I had a paper round, the local shop had 6 of us evening and morning and weekend, so about 600 customers. Most people had 12 papers a week. When he was selling the business I remember him asking people to pay up as being rural people would pop in every few weeks and settle up, and he was owed about £10k. That was a lot of money in the early 80s.

Paul

You could do what people used to do with GEC. Cash with order. Change your terms.

TJH

tjh290633 wrote:You could do what people used to do with GEC. Cash with order. Change your terms.

TJH

We have billed them for 6 figure sums in the past!

Suitcases full of fivers might cause us problems with the bank.

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

My first thought was to push back by telling them you are changing your credit terms back to 30 days, and will be charging interest and administration fees for late payments in future.

But given Mrs RS's unilateral decision to tell them to shove it (legal term), how do you imagine your competitors will respond to this firm when it approaches them offering some business and demanding 120 days' credit? Just something to consider.

redsturgeon wrote:
I wish I could tell you who this company is...you would be shocked.

Why can't you name the company? Also, the media would perhaps interested to hear about it.

We are a widget manufacturer not a bank. Please apply to your usual lender if you require short term funding.

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

Unfortunately, yes. Its all about about short term maximisation of shareholder value.

What gets measured gets done and I suspect the driver will be a big bonus conditional on achievement of a specific financial target by a, possibly local, CEO or CFO. However, the fact that they've come back to haggle rather than dropping you like a hot potato does surely tell you something.

Good luck - not that I suspect you need it

modellingman

modellingman wrote:

redsturgeon wrote:Would you believe that this multi billion pound organisation is now wanting to haggle with us and are asking if 90 days would be OK?

WTF

Is this what the business world has come to?

Unfortunately, yes. Its all about about short term maximisation of shareholder value.

What gets measured gets done and I suspect the driver will be a big bonus conditional on achievement of a specific financial target by a, possibly local, CEO or CFO. However, the fact that they've come back to haggle rather than dropping you like a hot potato does surely tell you something.

Good luck - not that I suspect you need it

modellingman

Mrs RS had a meeting with the marketing team we deal with. They as much told us (off the record) that they expect their suppliers to accept the terms and inflate their invoices to cover any extra cost.

The games we play...

Britain has long be known for having rather accountant heavy boards of all kinds of companies. I thought this kind of behaviour was ancient history.