Michael Pascoe writes:

Here’s a tip for getting the best out of
your supplier of financial services – offer to deal with your bank on the same
terms that the bank deals with its suppliers. Sounds fair, doesn’t it?

Some little time ago, banks were good
business partners for suppliers. Not only were they somewhat less likely to go
broke than the average client, they also paid their bills promptly. One
services sector executive I’ve spoken to swears he would receive payment within
a week of submitting an invoice.

Unfortunately for suppliers, that has been
changing. It went out to 14 days, then the ubiquitous 30 days. But now a couple
of the institutions that most pride themselves on “sustainability” and
“relationships” have blown out to six weeks for payment turnaround.

The technical name for this is screwing
your suppliers. It is part of the steady erosion of business standards and the
relentless drive to bleed a few more cents out of every transaction.

I have an untested theory that this growing
abuse of suppliers has a correlation with the rise of the bonus culture for the
select few in most corporations. A distinct two-tier class system has
developed: the top hundred or so executives on fat bonus incentives – and the
rest.

The bonus boys and girls on the make have a
direct interest in extracting the toughest terms from suppliers and the most
work from their direct reports. The way the modern corporate ladder works,
they’ve generally moved on and up when the real cost begins to come home to
roost. For those below bonus rank, well, thanks for making it all possible for
someone else.

I like to think efficient market mechanisms
might eventually sort out this malevolent cycle, that the few genuinely genuine
companies that pay more than lip service to ethical behaviour and relationships
would eventually outperform, helped by superior service from their
suppliers. That’s just what I like to
think.

In the meantime, ask your bank how long it
takes to pay its suppliers. If the answer is six weeks, inform them you’re
happy to do business on the same basis. Fees and charges will be paid six weeks
after being received – with no interest fee, of course. Hey, at least it will be fun
trying.

Peter Fray

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