Net 70 Terms: AP and Risk with Diverse and SMB Suppliers (Part 1)

We all too often find ourselves in the role of researchers and analysts at Spend Matters, having to do significant homework before covering a story or solutions provider. This almost always includes reference calls, product demonstrations (if applicable), briefings and trying out tools or services ourselves. But it rarely involves actually being the customer or provider experiencing a given service or capability. The fact is, truly being in the shoes of someone doing business with another party often provides the greatest lessons to learn and stories to share.

Such is the case with a recent run-in we had with an accounts payable function in a larger organization that had limited integration with the procurement function (and the line of business group actually buying our services). The story is fairly straightforward. Our team negotiated a contract for a variety of services with this organization, including Spend Matters PRO access, through the line of business. If formal procurement got involved, we did not see it. They got a great deal, so perhaps someone from sourcing was whispering in the ear of the line of business customer.

In negotiating the arrangements, we agreed to “on receipt” payment terms. Now, “on receipt” is the new Net 45 – something small businesses are all too painfully aware off. Yet, generally if you get payment within 45 days in a non-card, you’re happy, or at least if you’re a business owner like me. At 60 days, things get annoying. Beyond that, well, even though it’s an all-too-common occurrence, your customers are clearly increasing their supply risk and distracting the management of their suppliers from fulfilling their responsibilities.

Following the completion of the contract in question (no PO was issued), our organization sent an invoice to the customer through email, as there was no formal supplier portal for submission or XML-based integration or formal on-boarding process. The PDF email was in accounts payable limbo for over a month, until the third follow-up from our ragtag finance arm (part-time CFO + book-keeper + business owner). What happened might surprise you (or maybe not if you’ve been in our shoes). But we’ll keep you in suspense until tomorrow…check back then.

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