Avoid Late Payment Penalties
Paying supplier invoices late can be a useful source of supplier financing, but if the supplier pushes back and hits you with late payment penalties, the cost can exceed the benefit.
Many suppliers are happy to have your business and willing to overlook or even agree to extended payment terms. Some suppliers, and utilities are the classic example, provide zero leeway for late payment. In fact, their invoices may state a higher amount if not paid by the shown due date. A friend once worked for a firm that had a great branded product and that firm would discontinue supplying products if the customer did not pay within terms. Everyone wanted their brand so the customer’s business was dependent on continuous supply.
Most suppliers will overlook a few days of mail float and delay but it is equally important that the rest of the supply chain process works well for both of you. If late payments aggravate an already strained relationship they can result in higher costs, supplier shipment delays, credit holds and too much administrative time being spent of small return issues.
Asking suppliers for extended terms can be a delicate conversation but it can also provide your business with interest-free financing and needed cash. Stress to the supplier your relationship and partnership rather than your need for cash at the supplier’s expense.
B2B CFO® has over 200 experienced chief financial officers who can help improve profitability and cash flow management.