I don't post frequently, but I have seen the same broken record of late-paying companies giving excuses about 60 - 90 day payments. While I am posting this under the current thread, the same applies to all the same excuses that have come before, and all that will come after. I do not mean to call out "Robb Grandon" specifically, because there are many others with similar philosophies.
He may be a nice guy with good intentions, but the reality is that "Pay you when we get paid" and "60 - 90 days payment" are both unprofessional ways to do business with abstractor-vendors. Period.
Businesses which handle their payments to abstractor this way, do not use this same policy with other vendors. Phone bills, utility bills, taxes, payroll, etc., are paid promptly. If allowed to go even 60 days, the phones would be cut off, the employees would leave, and it would be dark inside.
An abstractor-vendor is no different than any other vendor. They provided a service, which is due payment. It is not contigent upon payment from any other 3rd party.
Very often, the justification for this payment practice comes in the form of. "...that's the way the business is....."
The real reason for this practice is often that the company is undercapitalized. Operating on a shoestring budget requires that the company wait to get paid before they can afford to pay their vendors. An abstractor is well advised to avoid this type of customer, as they are only one bad week away from being insolvent. The right way to run a company is to have sufficient funds available to handle everyday expenses. You can call it "excess working capital", "operating fund", or any other proper name your accountant likes to use. Really it is simply "enough cash to properly run a business".
Sometimes the end-user company pays late. Sometimes business is slow. Before getting into an industry with this business enviroment, make sure you have the cash to handle this. Otherwise, it is best not to try and get into the business, because as it has been said: "...that's the way the business is.....". Putting this risk and financial liability on your abstractor-vendors is both unprofessional and unfair.
The only other reason a company does this is to float their cash on the backs of vendors. In either case, taking on an abstractor client like these is risky for the abstractor.
When a company that gives reasons such as...
- "...nothing they could do, this is our accounting policy....."
- "......Like you I do not make the rules....."
They are saying they have no control over their ability to pay. My question to them would be why do you not have control over your accounting department? Don't they work for you? Just tell them to write the check. There is no "policy" you can't change if you are the boss.
There is no "Rule" that says you can't pay your abstractor immediately. (Except the rule that the bank has that a check will not clear without a sufficient balance.) You either have the money or you don't.
If they cannot control their own internal accounting department, then what hope do they have to collect on their accounts receivable from outside customers? Maybe this is why their abstractors have to wait 90+ days to get paid.
Saying that all your bills are 100% paid up through February is nothing to brag about. That is something worth embarassment. Personal accounts such as mortgage payments would be considered seriously delinquent or in default if paid that late. And business debts, ESPECIALLY TO VALUED INDUSTRY PEERS, should be considered no less important.
The bottom line is that any payment beyond 30 days is late. (Even 30 days is already an extension of free financing to the customer!) Any description of why it is late is simply an excuse. Abstractors, don't fall for it.
to post a reply:
login - or -
register