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.