The check's NOT in the Mail
Interesting Forbes article: this study says slowest paying results in a decade, with comments for several sectors.
U.S. companies continued to guard their cash despite increasing sales in 2011, reflecting continued uncertainty in the economic recovery and slower paying customers.
Privately held businesses, which account for up to 70 percent of GDP and generate 80 percent of new jobs, stretched their average time for making payments to the highest level in a decade, according to an analysis of financial statements by Sageworks.
Private companies’ accounts payable had an average age of 26 days in 2011, more than three days higher than in 2010 and the highest age since at least 2002, data generated by Sageworks’ financial analysis software shows.
http://www.forbes.com/sites/sageworks/2012/01/06/private-companies-paying-later/
“What I’ve been told is companies are extending payments to their vendors because they’re getting stretched on the cash receipts from sales to their customers,” he said. “They can only pay bills as cash permits.”
“I think they’re really prioritizing who they pay, and a lot of time they pay whoever barks the loudest,” he said.
Some manufacturers are paying the oldest invoice first and letting the next one age before paying that one. Others have the cash but are pushing vendors to wait on payment anyway, in order to generate what little interest they can on their funds. Another factor for some companies may be that banks have tightened up on lines of credit, giving companies less flexibility to tap that resource for short-term cash needs, Cole added.
As you contemplate which aspects of this study you have seen, ask yourself an upside questions. Where is your King Cash locked in a dungeon and how can you break some of those chains?
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