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About STR Software
A couple of weeks ago, the Wall Street Journal published “P&G, Big Companies Pinch Suppliers on Payments,” which discusses the growing trend of companies taking longer to pay back their suppliers. As the article states, P&G is actually behind the curve as they are just now extending their terms to 45 days, whereas many companies across the country have gone as far as 60, 90, or 100 days in order to free up cash.
Unfortunately, suppliers on the other end of these terms, who tend to be smaller businesses, are experiencing significant cash flow problems as they are effectively lending money to their bigger customers, interest free. Here’s how the article puts it:
“The moves are creating ripple effects. Companies that hold on to cash longer create deficits at suppliers that have to find financing, raise prices or squeeze other firms along the supply chain. Smaller companies with little bargaining power and less access to credit ultimately could see their costs rise, pinching funds that could otherwise be spent on hiring or investments.”
Our own company, STR Software, is impacted by this trend in two ways. Firstly, as a developer of enterprise software, servicing many of the largest companies in the world, we are also getting pinched by these longer payment terms. Interestingly, the second way this shift is impacting our customers is through those who are using our software to improve accuracy and speed up delivery of accounts receivable (AR) invoices to their own customers.
During a recent visit to a customer, a manufacturer/supplier of scientific equipment, the Operations Manager excitedly shared that AventX’s ability to choose to send invoices from any Oracle form has enabled the AR team to easily send invoices on-the-fly, rather than waiting for that evening’s batch of email and fax deliveries to be processed. Their enthusiasm for saving those few hours drove home the significant impact this feature is making in the business operations of our real-life customer. Doing the math, it’s easy to see how one day can have a significant impact on cash flow, especially across tens or hundreds of invoices going out daily. Given the longer and longer payment terms, every day counts all the more.
It’s unlikely large companies will reverse course from this trend in the near future, if ever. However, with better AR practices and the ability to get invoices out as quickly as possible, we hope our customers are able to keep pinching back.
STR Software develops and delivers integrated solutions for delivery of critical business documents. Click here to learn more about delivering AR Invoices from Oracle EBS.
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