Let Your Customer’s Fourth Quarter Games Begin
We’re smack in the middle of the 4th quarter for most American companies. And the games have begun!
What do I mean? Just that at this time of year, it’s likely to take you longer to get paid. Because all across America large corporations have started holding their payables.
Many do it routinely at this time of year. It’s all part of a variety of techniques to improve financial results to look good for Wall Street and shareholders. CFO Magazine has an excellent article about fourth quarter financial gamesmanship:
Let the games begin.
The working capital games, that is. Right now, companies all over America, in every industry, are beginning a dash for cash. If past is prologue, many companies will go to great lengths to slash their working capital in the fourth quarter. The goal: to paint a beautiful picture of their cash flows by December 31 — one suitable for framing in the annual report.
To that end, companies will grant extremely favorable terms to customers, and make liberal use of discounts and rebates. They will step up their collection efforts, even as they hold back on paying their vendors. They will push inventory orders back on suppliers. They will do everything they can, in short, to free up cash from receivables, payables, and inventory, the components of working capital.
Notice the part I bolded in the above quote, about holding back on paying vendors. That means you. They’re holding back on paying YOU.
When I was in the corporate world the company I worked for did it all the time. Come mid-November, very little got paid. Certainly not smaller vendors.
It was nothing personal. For a long time in my corporate days as a manager I did not even realize it was happening with the invoices I submitted. The Accounts Payable department routinely held payables and didn’t tell me anything about the invoices for the vendors my department was using. It was only as I gained more experience and moved up higher in the food chain that I realized this game went on — and that it went on every year end.
Not that I could have done anything about it. If Finance was holding payables, they were holding payables. Woe betide the poor manager or director or VP who tried to mess with the CFO’s grand plan at year end. Best not to get in the firing line.
So, just keep in mind that if you haven’t been paid by now from that large corporate customer, there’s a very good chance you may not get paid again until after January 1, 2008.
