Accountant says we must be "slow payers"

cantdecide

Working in a construction related business. I've had to arrange access using a reasonably unusual machine.

For about the fifth time in the last few months I've rang around a trail of minor suppliers and had a trail of "you have outstanding balances on your account". We've done better (been luckier) than most of our competitors and I know that we are in good financial shape. However, we seem to have tons of smaller balances from 'emergency' suppliers that are causing me humiliation when I need to pull something out of the fire. Most balances seem to be 6+ months old.

I went to our accountant to ask why I'm having to meddle in accountancy problems at an operational level. She argues that it's better that "we are known in the market as slow but reliable payers- it gives us room to maneuver". I'm told by our manager that whenever accounting issues are raised - insist they contact our accounts dept. to which I usually get a "nevertheless" type reply.

I feel it's costing me time and ruining our credibility in the marketplace and I feel humiliated having to justify and lie because of our accountants cunning plans. This is especially when these tasks are usually short notice 'save our ass, please' requests.

My question is whether this is a sound business strategy or not?

Axwell

Im not in the construction business so things might be different but I wouldnt consider someone who has account balances 6+ months old to be considered "slow but reliable" as your accountant put it. Id go with just "slow" to pay up and as for having room to maneuver this doesnt seem the case when you are under pessure asking these emergency businesses to save your ass and you owe them money.
They would be more likely to help you if you were "reliable", especially in the current climate being paid up on time etc would go a long way.
Just my 2c on it but id be telling your accountant to do the job they are paid to do and sort out the balances and not be trying to make strategic plans that are causing you probs like this.

Alcatel

Measure cashflow against business reputation, and how much "street credit" you're spending to maintain the cashflow; and do you really need to hold up those payments?

Your accountant shouldn't be setting your strategy, s/he should tell you the options.

Boots can extend credit from its suppliers because it accounts for a huge portion of their business, so f**k you and there's always somebody else hungry and happy to take your place if you don't like it. But they're a bigger fish. So you decide if it's hurting your business.

If you can afford to pay I'd generally err on the side of doing it, whilst keeping something aside for the cashflow dry days.

cantdecide

I agree.

We have main suppliers who we can owe 6 figures to and who get paid reliably and having €300/ €400 balances to virtual strangers that we can easily fix up stopping me from doing my job must be taking the proverbial, IMO.

keefg

cantdecide wrote: »

My question is whether this is a sound business strategy or not?

I worked on the other side of the fence in Credit Control for years also in the construction industry.

Up to 18 months / 2 years ago I would have agreed with your accountant. We would have dozens of companies on our debtors list who would be considered "slow but reliable" and they would be given a lot of flexibility regarding payment because we always knew we would get the money......

but.......

.....things are very different now and I know from talking to my friends who still work in the AR dept that the directors don't give any slack on outstanding accounts anymore, no matter who the client is or how long they have been doing business together.

If a company is on a 60 day account and don't pay by day 75 then the account is put on stop and the letters & phone calls chasing payment start. If no attempt is made to clear the o/s balance by 120 days then a report goes to the credit insurance company and it becomes an "official" bad debt.

Once that happens it becomes very difficult for the debtor to obtain credit with any other (large) suppliers.

I know you say your company is in good shape but everyone is aware how many companies have folded over the last year or two and suppliers, especially large ones, don't want to risk large outstanding accounts on their books at the end of the month.

From what you are saying though, your day-to-day operational headaches are caused but a few o/s debts of fairly low value and as you say, cause you time & embarrassment to your own customers when you are in a jam.

I personally would clear all the small debts and keep them onside for those emergency jobs.

Borzoi

cantdecide wrote: »

For about the fifth time in the last few months I've rang around a trail of minor suppliers and had a trail of "you have outstanding balances on your account". We've done better (been luckier) than most of our competitors and I know that we are in good financial shape. However, we seem to have tons of smaller balances from 'emergency' suppliers that are causing me humiliation when I need to pull something out of the fire. Most balances seem to be 6+ months old.

But for the female accountant, you sound like my old firm. And similarly I was in your position - need something done, contact small supplier, account on hold, won't move till they get money.

Then you discover that the accountant has had the invoices, and had been dodging suppliers etc. Ruined the company's and my credibility. Eventually I stopped using my contacts (usually better and cheaper) because when they didn't get paid, they'd be on to me looking for money, I'd get on to accountant and get BS reason for non payment. I'm so glad to be out of there.