Help! Our supplier is trying to change our payment terms
Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.
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Dear Your Business Credit,
We have a
supplier who requires all purchases be made with a credit card and they keep
all the necessary credit card info on file. Our terms with this vendor are
"net 30." They are saying that they will charge our card five days
after invoice date instead of our 30 days we should receive with "net
30" payment terms. Can they do this? What are our options? Thank you in
advance for your help. -- Beverly
I ran your
question past Timothy Jacquet, senior vice president at Apple Capital Group, a commercial finance group in Arlington, Texas.
he says, if a vendor is tightening payment terms, it is because a triggering
event has spooked the credit manager. For instance, something may have appeared
on your company's credit report that has made the vendor worried about being
paid. "No one wants a default on their portfolio," he says.
circumstances, the fine print of the credit agreement you signed may give the
vendor the ability to charge your credit card in less than net 30 days -- meaning
less than 30 days from when the invoice was issued. He recommends that you look
back at the original credit agreement to see what it says. If you have given
the vendor an authorization to charge your credit card with a signature on file,
some banks will process the transaction, even if it is not in the exact time
period you expected.
mean you have no recourse. He suggests contacting the credit manager for your
vendor and asking in a nice way if the company will honor your original
agreement to collect payment in net 30 days as a courtesy. It is possible that
there was a mistake on the part of your vendor. "Usually credit managers are
honest," he says. "They'll tell you: This is the issue. We got a credit alert.
Or it was our mistake."
What if you
reach someone who isn't accommodating? Then maybe it's time to take your
business elsewhere. "If they don't want to cooperate, in this economy you can
find vendors left and right, unless they're selling something very exclusive,"
he says. If the vendor has not followed the agreement you signed, you may also wish
to complain to the Better Business Bureau, he says.
alone in facing a situation like this. Since the recession, many suppliers have
tried to improve cash flow by tightening payment terms to their customers. It
is still hard for some businesses to get bank loans and lines of credit at
attractive rates to cover operations while they wait for payments, so they are
getting less generous about extending credit to customers.
supplier is tightening up its payment policy, you might try negotiating a
discount for paying early -- especially if you spend a lot of money with the
vendor and have good credit.
companies offer customers terms of net 30 days, they will offer a discount for
paying a lot earlier. You might see a notation on the bill that says "1 percent
10 net 30" or "2 percent 10 net 30," which means that customers
who pay within 10 days of the invoice date will get a 1 percent or 2 percent
discount. It can't hurt to ask your vendor if you can get a discount for paying
in the five days they're demanding. This can save you a decent amount of money
over the course of the year. Good luck!
See related: 8 steps to build your business credit profile , Will accepting credit cards help my business's cash flow?
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Published: December 30, 2013