The Slippery Slope of Squeezing Payments to Suppliers, April 26, 2013: Commenting on The Wall Street Journal article Firms Pinch Payments to Suppliers published April 16, highlighting how large company policies of extending the length of their payment terms beyond a reasonable norm, hurts their suppliers, Nick protested the detrimental “lose-lose” effect such practice can have on small and large businesses, their shareholders and the economy.
Larger corporations shifting liability and debt risks to their smaller suppliers to provide for more assets on their balance sheets put everyone at risk. Bigger firms have lower borrowing costs due to higher leverage with major banks and the economy of scale than all of their individual suppliers.
If truly interested in serving their customers and making sound profits for their investors, large corporations could save costs by simply borrowing what they need to maintain a 30-day payable cycle. Good relationships with suppliers are key to smooth business running and their own success as well. If we expect the economy to recover and grow, the needs of smaller businesses can’t afford to be so ignored.
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