Net Nonsense

Yep, that’s partnership: Turn your much smaller suppliers into a bank

I n my past life as president of a medical device company, I had two reliable leading indicators of a potential customer relationship. Basically, one was if the customers demanded automatic annual price decreases, and the other was if their payment terms were greater than net-30. Those few customers who offered to pay faster would become strong partners because they knew supplier financial stability is in their best interest. Those who tried to insist on longer terms just considered suppliers a necessary evil. The correlation was nearly perfect.

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Comments

2-10-net 30

This is, or was, how companies encourage customers to pay quickly: a 2% discount if paid in 10 days, net due in 30. The companies from which P&G wants 120 days in which to pay should announce a 4% price increase, to be waived if payment is received in 30 days.

Excellent article!

Thanks for sharing - I wish more companies saw the benefits in paying quickly, both from a monetary and a relationship building perspective.

Customer evaluation & selection

Hi, Mr. Meyer: are you going to tell ISO people to add this clause to the next edition of ISO 9001? Because more and more companies realistically do it: often, it's better to lose a customer or a supplier, than keeping him, at a high cost.