Cash is King — When Payables Become a Supplier's Lifeblood

The news out of the capital markets this week has rocked the financial world. From the downfall of Lehman to the Fed's new $85 billion investment in AIG to the steep drop in oil prices, it's been nothing but chaos in the trading pits. But the agony is not just limited to investors. As a result of capital liquidity concerns, banks more than doubled the LIBOR (intra-bank overnight loan rate) rate to over 6% -- up from the 3% range earlier in the week. What does this mean for procurement? Quite a bit in fact. For one, suppliers are going to have an even more difficult time securing loans (as if the situation were not bad enough from a credit perspective before this week's news!) This means that with the exception of cash and cash equivalents, receivables really are their only lifeblood at the moment. Which is further reason why companies should get even more serious about investing in EIPP and supply chain finance capabilities. Not only for the opportunity to profit from suppliers needing earlier payment but to keep their suppliers in business in the first place.

- Jason Busch

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