Coronavirus-era advice: Tips on asking suppliers for payment-term extensions and other concessions

Disruption from the coronavirus outbreak is forcing some tough conversations about payments.

It’s never an easy topic, but asking suppliers for concessions on a call or video chat in an empathetic manner — or even pre-empting the discussions by socializing ideas early — is far more effective and conducive for relationship-building and joint development than sending out emails, letters or other methods.

Below is a partial list of approaches you might take (and questions to pose), ideally in conversation with suppliers if you need to ask for concessions — or may need to ask for concessions — given all of the disruption from COVID-19. If you have ever been trained in applying cognitive behavioral therapy (CBT) or Sandler sales training, it’s also worth taking the approach of asking the right types of questions, including open-ended questions, to lead your supplier down a particular path.

I won’t cover these techniques here in detail, but I’ll give a quick primer and some suggestions for outreach to start and further conversations to an effective end. Getting suppliers to talk and open up by empathizing with them is an ideal outcome.

It’s even possible to get them to volunteer a solution, without yielding ground, rather than being confrontational and demanding. These approaches are likely to be more effective, and result in better relationships, while also surfacing information you would not have otherwise discovered in the process, and that information may help you reduce risk and/or improve your negotiating position.

Even if you’ve not been training in CBT or Sandler, start by remembering you are not the DPO extension grim reaper — approaching the outreach as a binary notification or negotiation, even if that’s what you’re really doing. Frame it (to yourself) as a discussion, even if you need to come away from it with certain assurances or contractual changes.

Outreach Checklist to Frame Any Discussion

Start by preparing to humanize the discussions upfront. I encourage you to write down this of questions or a similar one to make sure the conversation starts on the right foot:

  • Ask questions about colleagues, family, etc. Is everyone safe? Healthy? Recovering?
  • Ask questions about the impact on them, in their role
  • Ask questions about the impact on the business
  • Peel the onion via questions on understanding the business situation (especially if your supply risk “spidey sense” goes off)

Remember to share your situation and what you’re seeing in the market, especially with other suppliers. And finally, transition the discussion to the task at hand, but nicely!

Questions to Ask Post Transition

Pre-emptive Discussions — Socializing Ideas Early is ALWAYS Better

  • How are your other customers reacting to the current situation? Do you have any significant credit risks you are aware of based on industry, geography, etc.
  • Would you be prepared if we ask for extended payment terms on current invoices?
  • Would you be prepared if we ask for extended payment terms on future invoices?
  • What is your willingness to work with us through receivables collection issues we may have with our clients and its impact on our working capital?

Joint Problem-Solving

  • How can you help us work through receivables collection issues we are starting to have with clients? What are other customers asking you about?
  • Are there any systems, technologies, bank/lender or other products that either of us could apply here?
  • What creative approaches have you seen to managing working capital issues — both yours and ours — in this situation so far?
  • What is most important to you in this situation? These are some of the pressures I’m getting (list), but what matters to you?

Extending Payment Terms

  • We need to extend terms with our suppliers. It stinks. But what would make the “pain” of extended payment terms easier? What commitments can I give you in return?
  • If we were able to offer an effective invoice discounting program funded by partners, would that help? We realize this is not ideal, but would this be acceptable for now?
  • In “dire” situations with the supplier based on risk ratings or discovery thus far in the discussion: We realize extending payment terms could put your working capital and credit situation into uncharted territory. What can we do to help work with you through this? What can I do?

If You Get Pushback

Here are five tips when you get pushback:

  • Empathize, do not confront (e.g., “I understand how this makes you feel and the situation it puts you in; I understand this puts your organization in a place neither of us want it to be”).
  • Ask open-ended questions.
  • Deflect: Ask questions you can’t answer and that will get them talking: “What would you like me to do about that,” is a favorite, per Sandler.
  • Transition back to the “ask” without negotiating (you don’t have to yield).
  • Once de-escalated, finalize the notification (nicely!) and/or get commitment on what it will take to arrive at a solution in cases where there is material supply risk or another concern, especially in the case of strategic supplier relationships (which should also be part of the outreach beyond a notification alone).

Good luck. And in the comments section, please list any other tips you may have.

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First Voice

  1. David Gustin:

    A few other thoughts to add here:

    1. Put a timeframe on this extension – will it become like Govt policy, and temporary “actions” become permanent.
    2. Do your homework – are you working with suppliers that have done stock buybacks as opposed to keeping cash for a rainy day. The airlines are a perfect example – $37bn in free cash and paid $42bn in stock buybacks over the same time period.
    3. Since most companies are tapping credit revolvers, check to see who has cash availability.
    4. Since the Fed is backstopping the Commercial Paper market, if companies can issue CP, that does provide a source of liquidity.

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