Big Companies are Starting to Flex Their Muscles

In the spirit of “Never let a good crisis go to waste,” many large companies are starting to demand concessions from their suppliers.  We, like many manufacturers, have received numerous requests for extended payment terms and discounts.  Generally, those requests come from big, well-known companies trying to use their power to improve their own financial situation.  If they bankrupt a few suppliers, so be it.  They’ll find someone else.  There’s a sucker born every minute.  In times like this, people often forget that there is no sale until you get paid.

One of my favorite lines came from a well-known public company.  In their letter, they said, with presumably a straight face, “Due to the inefficiencies caused by our staff working from home, we are immediately extending our payment terms to 120 days.”  Really?  We’re a little company and we figured out how to pay our bills.  This company has almost $40 BILLION in revenue and can’t figure out how to do ACH payments from a home computer.  Of course, their website lists values of communities and integrity.  I beg to differ.

Another large company sent a letter that included the excerpt below to their “supplier partners”:

As a result of extensive analysis internally and the unprecedented economic conditions, we are having to move forward starting May 18th with:

  1. Increasing our payment terms to NET 90 days, if you are not already at those terms.
  2. Apply a 10% below the line (bottom of invoice) discount to all goods and services ordered from your company. This discount would be in addition to any standard unit price discounts you may be currently extending to us.

Ridiculous demands like this are how the economic system falls apart.  For our economic system to work, trust has to be prevalent.  If I do not trust that you will pay me, I will not sell to you.  If you do not trust that I will deliver a good or service to you, you will not buy from me.  It sounds pretty simple but trust is the bedrock of our economy. 

There is a time and a place for the capitalist golden rule to be invoked. (He who has the gold makes the rules.)  Given the current economic challenges, trying to squeeze suppliers to effectively force them to become your bank or improve your margins is reprehensible behavior.  If you can’t make money buying from me and I can’t make money selling to you, it is best that we don’t do business together.

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