Everyone is familiar with customer ageing balance. Obviously, because it’s important to get that cash in as soon as you can, right? And for sure your CFO has KPIs about Day Sales Outstanding as one of his top ten on his monthly reports.
But let me let you into a little known secret. No-ones checking their supplier ageing balance. Yes, we are, I hear you say… But you aren’t. Most companies only check the balance per supplier. As long as it’s a creditor balance (ie you owe them, and not the other way around), most companies are happy.
A customer once laughed and said to me –oh, we don’t have to worry about supplier ageing, if we didn’t pay them, they would pick up the phone!
Sure, but what if they do owe you money. What about those product returns? The duplicate payment that your internal controllers picked up on last month? The year-end rebates that they owe you, that your purchasing team spent months negotiating. Who is tracking those?
Such transactions are often hidden within the creditor balance. And the supplier will be happy to keep them hidden.
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