Local Interest

Knock wood, my experience has been a bit better than this.

We have a supplier, whom we  order from each spring. As I placed this year’s order, the supplier mentioned that his receivables were very slow to arrive but since we pay prior to delivery he would complete our order first. For those of you who don’t know, receivables are those outstanding invoices for goods or services that haven’t been paid to the supplier.

You know I’m frugal and you know I loathe debt so you won’t be surprised to learn that I pay our bills as soon as they hit my desk. I do this for two reasons-  a) if I’m receiving a bill it’s because I already have goods or services that a provider was kind enough to trust me to pay and  b) I only feel comfortable when I am current.

Back to our supplier with the slack receivables. He went on to tell me that his overhead is high so customers who let their bills sit for 30, 60, and 90 days have a negative impact on his business. Typically, micro business owners leave their profits in the business to use as working capital  and draw only enough to live on (we’re not talking vacations and diamond encrusted tiaras here) from the business. Generally, the customers who make the little guy wait are large corporations with deep pockets, or not as our pals on Wall St. demonstrated when taxpayers bailed them out.

The problem arises when several customers are delinquent in payment. The micro business owner has no cash reserve left to fund operations, purchase inventory, or to make payroll. For businesses that are significantly leveraged the option of getting short term financing from a bank is no longer available.

Apparently, there are payday loans for businesses now in the form of a professional franchise providing working capital for business. It sounds a lot like a legal loan shark to me. The supplier is going to resort to dealing with one of them.

It troubles me to see local business forced into questionable financial methods due to delinquent corporate accounts. Bigger isn’t necessarily better.

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About elroyjones

Married, no children, responsibly self-directed, living happily.
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7 Responses to Local Interest

  1. Big business. It’s almost as hard for me to fathom as religion and politics.

  2. judithatwood says:

    In all of my administrative work, the story is the same: These enormous corporations let bills go forever, while small businesses almost always stay current, and are far more polite about it, to boot. Scary that it’s the corporations who are having more and more influence over politics in America!

  3. Unfortunately, I had to part ways with several small business owners who used my secretarial services yet failed in a timely manner. It was costing me more (in time and energy) to hound them than the billing was worth. The bigger companies (university, non-profits, legal firms, tech companies) were all pretty faithful. Mine was a tiny business, though, so I wasn’t dealing with any Wall Street biggies.

  4. elroyjones says:

    Here, the biggest offenders are state government and conglomerates. It appears state government is engaged in a Ponzi scheme, robbing Peter to pay Paul. I suspect that the large entities are engaged in similar practices. Ironically, there are a few summer enclaves for the ultra wealthy here and more than one family is entertaining inquiries from the SEC.

    Payment upon receipt should apply to all goods and services business transactions- The grocery store demands payment upon receipt of customer’s groceries, the garage demands payment when a mechanic repairs a car, hair stylists are the same, even the beleaguered post office is paid at the point of sale. Cash accounting would go a long way toward correcting the unfortunate business practices that have brought the economy to its knees.

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