Scott Blakeley, Esq.

A payment trend affecting credit teams across all industries is customers disregarding supplier-set trade terms, and extending these terms. Private U.S. companies reported a continued increase in their average accounts-receivable days. This is despite the fact that customers are sitting on record cash holdings. I have discussed in articles the ways in which the supplier can either accept a customer’s terms pushback strategy (TPS) and attempt to mitigate the associated credit risk, or use principled responses (i.e. contract controls, loan covenants and the Robinson-Patman Act) to rebuff the pushback.

However, given the increasing use of formal TPS rollouts (as opposed to TPS requests) from what the supplier’s management would deem an indispensable customer, as well as inflationary enviornment, this article discusses the immediate and long-term impact of a customer’s TPS on the supplier’s profitability, with emphasis on the supplier’s cost of capital and the impact of TPS in an inflationary economy.… Read the rest