Democratic Underground Latest Greatest Lobby Journals Search Options Help Login

Big Firms Are Quick to Collect, Slow to Pay

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » Topic Forums » Economy Donate to DU
question everything Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-09-09 12:37 AM
Original message
Big Firms Are Quick to Collect, Slow to Pay
AUGUST 31, 2009

Big Firms Are Quick to Collect, Slow to Pay


Large corporations are tightening the screws on their smaller counterparts as the credit crunch intensifies companies' efforts to hold on to their cash. In an example of corporate Darwinism at work, the recent round of quarterly earnings results showed companies with annual revenue of more than $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers. Firms with less than $500 million in annual sales, on the other hand, generally took longer to collect cash and paid their bills faster than in the same period a year ago, according to an analysis conducted for The Wall Street Journal by REL Consultancy, the working-capital division of business-consulting firm Hackett Group in Atlanta.

As credit markets remain tight and banks rein in lending, corporations are being forced to squeeze more cash from their day-to-day operations at a time when revenues are slowing and the economy remains weak. Companies are finding they can rely less on external funding and costly bank lines if they can bring cash in the door faster and hold on to it longer. The cash they save can be used to pay off debt or be invested in other parts of the business. So far, the biggest and fittest companies are often flexing their financial muscle, benefiting at the expense of smaller and weaker ones.


Some of the world's biggest corporations have imposed tough payment terms on vendors. Early this year, Anheuser-Busch Cos., owned by Belgian brewer InBev NV, told suppliers it would take as many as 120 days to pay its bills from 30 days previously. General Electric Co. freed up $3.8 billion in cash last quarter through steps such as shortening cash-collection times, collecting past-due accounts and stretching out payments, a spokeswoman said. Consumer-goods giant Procter & Gamble Co. recently said it is "relentlessly focused" on managing cash flows, entailing, among other things, speeding up collections from customers.

Companies with more than $5 billion in annual revenue took an average 55.8 days to pay suppliers and trade creditors in the second quarter, up 5% from 53.2 days a year earlier, according to REL. They also collected faster on their bills, taking an average 41 days versus 41.9 days a year earlier. Businesses with less than $500 million in sales paid vendors in an average 40.1 days, down 6.5% from 42.9 days, REL found. They took roughly 8% longer to collect payments, or an average 58.9 days, versus 54.4 days a year earlier. The data show that even before this downturn, smaller companies paid their bills faster and waited longer to get paid, but the recession exacerbated the split. "It demonstrates the extent to which smaller companies are a victim of scale, given that they have weaker balance sheets and are less able to borrow," said Mark Tennant, president of Americas for REL.


But in practice that often involves bare-knuckle negotiations between companies and their customers and suppliers. There is also a balancing act involved. If companies force untenable terms on their suppliers, they risk putting vendors out of business, which could end up disrupting their own operations.. Some large companies throw their weight around by agreeing to pay more quickly if their suppliers speed up deliveries or offer significant discounts. Some big customers also demand a discount if they pay early, small suppliers say.

(snip) (subscription)

Printed in The Wall Street Journal, page A1

Printer Friendly | Permalink |  | Top
notesdev Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-10-09 08:24 PM
Response to Original message
1. Too big to fair deal... nt
Printer Friendly | Permalink |  | Top
DU AdBot (1000+ posts) Click to send private message to this author Click to view 
this author's profile Click to add 
this author to your buddy list Click to add 
this author to your Ignore list Thu Jul 20th 2017, 09:47 PM
Response to Original message
Advertisements [?]

Home » Discuss » Topic Forums » Economy Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002
Software has been extensively modified by the DU administrators

Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC