# Is it normal for a large company to have a standing policy of paying its suppliers in 90 days? 120 days? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [September 15, 2023, 1:10pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160 "2023-09-15T13:10:32Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Heracles](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/heracles/32/487_2.png) [@Heracles](https://boards.straightdope.com/u/Heracles)\ **Post date:** [September 15, 2023, 1:10pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/1 "2023-09-15T13:10:32Z")
This is about a large multinational company, supplying parts for many sectors of industry. About 4 years ago they announced internally that all their suppliers would be paid in 90 days, and no interest/penalties would be paid. In practice this 90 days was more like 100 because of processing delays. Exceptions could be made to reduce this to 30 or 60 days if several people up the chain of command could certify that an exception was unavoidable. This made life pretty unpleasant for the company’s purchasing managers, and of course for small suppliers. This year the policy was switched to 120 days, and all existing exceptions were thrown out. This company is publicly listed and is profitable. Is this a trend in industry now? Or are they just trying to impress Wall Street? ---
**Author:** ![Dorjan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dorjan/32/12440_2.png) [@Dorjan](https://boards.straightdope.com/u/Dorjan)\ **Post date:** [September 15, 2023, 1:13pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/2 "2023-09-15T13:13:45Z")
Ahh, “extending payment terms”. Holding onto cash longer allows the company to invest or use that money in other ways before it has to pay its bills. By delaying payments, a company can show more cash on its balance sheet, which can make its financial metrics look better in the short term. This can be appealing to investors and analysts, if annoying to suppliers and hard on smaller suppliers that don’t have the cash reserves to cover their own expenses while they wait for payment. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [September 15, 2023, 1:49pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/3 "2023-09-15T13:49:39Z")
I mean, all businesses will try to obtain terms that are as favorable as possible. Are you seeing something specifically unethical here? If they are being dishonest about it I guess that’s a problem, if they are violating agreed terms of payment but only to a point where if they eventually pay it’s not worth their suppliers suing them. But if they are honest about the fact that this is the way they want to operate, it’s a free market, and suppliers can decide whether to do business with them or not. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [September 15, 2023, 2:07pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/4 "2023-09-15T14:07:46Z")
I’ve had a few large customers do that. I’ll get a form letter explaining that they’re going to start paying in 60 or 90 days regardless of any previously agreed upon terms. You can either accept it or stop selling to them. The times it’s happened, the customer is orders upon orders of magnitude larger than us and there’s so much competition that if I stopped selling to them today, they would just order from somewhere else without missing a beat. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 15, 2023, 2:19pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/5 "2023-09-15T14:19:55Z")
> [@Riemann](#): > > it’s not worth their suppliers suing them. Unless you band together and bring a class action, as Elon Musk’s suppliers are doing. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 15, 2023, 2:31pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/6 "2023-09-15T14:31:19Z")
Even when the policy is Net 30 payment in actual practice it can extend to 90 days or longer. Here’s my post from 11 years ago on this practice: > [@Net 30 terms; when do you pay?](https://boards.straightdope.com/t/net-30-terms-when-do-you-pay/640135/26): > > Net 30 means that in 30 days you can call and ask why you haven’t been paid. You’ll be told that since 30 days have passed the bill will be submitted to accounts payable. In a week or two AP will process the bill and set a payment date for the next scheduled payment date based on approval by management. When that payment date arrives (perhaps another 30 days) management will have some questions about the work performed and payment will be rescheduled after those concerns are addressed. When that is done the next payment date will be scheduled again, probably another 30 days, and when that day arrives you can call and ask where your money is and you’ll be told checks are cut on some upcoming date (don’t worry, it’s probably only around 15 more days now). The check will be cut but not sent out until you call again. Expect another 10 - 15 days for the check to actually be mailed. So maybe after 90-100 days you’ll get paid. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [September 15, 2023, 2:43pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/7 "2023-09-15T14:43:16Z")
I’ve had plenty of customers pull that BS. Those ones I have no problem walking away from. It’s just always something. And, whether it’s just an excuse not to pay or an excuse because they don’t have the money or just how their inner bureaucracy works is irrelevant to me. At some point it’s not worth my time to have to make a dozen calls about each invoice. I have a handful of customers in my system with a notes that remind me to get the payment or a credit card number upfront. ---
**Author:** ![leahcim](https://avatars.discourse-cdn.com/v4/letter/l/b4bc9f/32.png) [@leahcim](https://boards.straightdope.com/u/leahcim)\ **Post date:** [September 15, 2023, 3:07pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/8 "2023-09-15T15:07:49Z")
I’ve seen (in my former life as a consultant) terms like NET60, but a 2% discount if you pay NET30 (NETXX just meaning, “pay in XX days”). NET90 would have been excessive even if it was not unilaterally imposed. Where I saw it was in the context of just-in-time supply chains where the idea was that within 60 days you should have the cash from selling the end-product that you can use to pay back your suppliers. It’s basically your supplier loaning you short term operating capital that you would otherwise have to borrow. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [September 15, 2023, 4:03pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/9 "2023-09-15T16:03:25Z")
Big business has been doing this stuff since I was in college. It’s not new. It may be a bit more widespread or newsworthy recently. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 15, 2023, 5:11pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/10 "2023-09-15T17:11:44Z")
Ten years ago I worked for a big company where we were told don’t even think about telling our suppliers they’d get paid in a reasonable time. It’s all about the power imbalance. We were a big enough customer that our suppliers had to eat the delay. We were unethical in lots of other ways also. ---
**Author:** ![solost](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/solost/32/11776_2.png) [@solost](https://boards.straightdope.com/u/solost)\ **Post date:** [September 15, 2023, 6:28pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/11 "2023-09-15T18:28:28Z")
> [@Dorjan](#): > > Ahh, “extending payment terms”. Holding onto cash longer allows the company to invest or use that money in other ways before it has to pay its bills. Yep, many years ago when I worked for a company that supplied non-production items to the Big 3 auto companies, they all did that to us. As Dorjan points out, holding on to their money as long as they can financially benefits them, and they were so large compared to us, it’s not like we could do anything about it. ---
**Author:** ![InternetLegend](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/internetlegend/32/13154_2.png) [@InternetLegend](https://boards.straightdope.com/u/InternetLegend)\ **Post date:** [September 15, 2023, 6:40pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/12 "2023-09-15T18:40:05Z")
Yup. Small companies are just at the mercy of the huge ones. Government entities are also notorious for this, but if you decide not to sell to them, you’re giving up a huge potential revenue stream. If you do a lot of business with them and you can bite the bullet for the first round or two, it gets easier to carry them, if not less unfair. The killer here is when you’re a supplier who’s small enough for the big guys to push around and not also not big enough to do it to your own suppliers. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [September 15, 2023, 6:55pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/13 "2023-09-15T18:55:37Z")
> [@Voyager](#): > > Ten years ago I worked for a big company where we were told don’t even think about telling our suppliers they’d get paid in a reasonable time. It’s all about the power imbalance. We were a big enough customer that our suppliers had to eat the delay. > We were unethical in lots of other ways also. > [@solost](#): > > Yep, many years ago when I worked for a company that supplied non-production items to the Big 3 auto companies, they all did that to us. As Dorjan points out, holding on to their money as long as they can financially benefits them, and they were so large compared to us, it’s not like we could do anything about it. I’m still struggling to see why you see it as “unethical” if (as you say) there is a clear understanding that those are the terms of business. When you pay for something is a negotiable part of doing business, just like anything else in a free market economy. Why is it any different from trying to negotiate as a low a price as possible from your suppliers? I do think it’s unethical if a large company _violates_ an agreement in a manner that’s designed to exploit the fact that its not practical for a smaller company to sue them. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [September 15, 2023, 7:01pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/14 "2023-09-15T19:01:37Z")
“These are our terms, take them or leave them” is not exactly a negotiation. Further, if you do take those terms and do business for awhile and find out that well, the real terms are much worse than the stated terms, what now? Or in the alternative, you take the terms, they abide by them as stated, then 12 months later they announce “these are the new revised less favorable terms” what now? To my mind ethical behavior requires that you would be willing to take either side of the deal. If the big company would not accept these payment terms from their customers then it is by definition unethical for them to demand them from their suppliers. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [September 15, 2023, 7:05pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/15 "2023-09-15T19:05:09Z")
> [@Riemann](#): > > Why is it any different from trying to negotiate as a low a price as possible from your suppliers? It’s ethical in the same way it’s ethical when a landlord says “We’re raising your rent next month. Either pay an extra $100/mo or we’ll allow you to break your lease and move out and the end of this month”. It might be legal or even ‘normal’, but it doesn’t make it ethical. ETA, this would be in reference to a customer unilaterally changing the payment terms (normally set by the vendor) after the relationship had already been established. ---
**Author:** ![solost](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/solost/32/11776_2.png) [@solost](https://boards.straightdope.com/u/solost)\ **Post date:** [September 15, 2023, 7:05pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/16 "2023-09-15T19:05:50Z")
> [@Riemann](#): > > I’m still struggling to see why you see it as “unethical” if (as you say) there is a clear understanding that those are the terms of business. Not sure why you also quoted me there. I did not use the term ‘unethical’, I simply stated a fact from my own experience, that since the auto companies were an 800lb. gorilla compared to us, we had to accept it. It may be a perfectly ‘ethical’ practice, but it’s tough on a relatively small business trying to keep a positive cash flow. And, they would sometimes change the terms, with little warning, extending the payment time from 60 to 90 days, or 90 to 120, or whatever it was, don’t remember exactly. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [September 15, 2023, 7:06pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/17 "2023-09-15T19:06:16Z")
> [@LSLGuy](#): > > To my mind ethical behavior requires that you would be willing to take either side of the deal. If the big company would not accept these payment terms from their customers then it is by definition unethical for them to demand them from their suppliers. This is a weird perspective. That’s just not how a free market economy works. There are no abstract “fair” terms. Everyone from the consumer on down tries to get the most favorable terms they can, and that creates constant pressure to produce things more cheaply and efficiently, that drives innovation and increases in productivity. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [September 15, 2023, 7:11pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/18 "2023-09-15T19:11:10Z")
Not really so simple, which is why there is, at times strongly debated, antitrust law, consumer protection, as well as securities regulation, tax law, etc. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [September 15, 2023, 7:13pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/19 "2023-09-15T19:13:53Z")
> [@Riemann](#): > > That’s just not how a free market economy works Some may argue that a free market economy isn’t ethical. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [September 15, 2023, 7:27pm UTC](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160/20 "2023-09-15T19:27:16Z")
> [@Joey\_P](#): > > Some may argue that a free market economy isn’t ethical. Sure, but then make a coherent argument against the fundamental principle of a free market economy, don’t pick one tiny aspect of the way it operates that’s no different from any other part of it and say _that_ in particular is “unethical”. The _essence_ of a free market economy is that everyone tries to obtain the most favorable economic terms possible. > [@DPRK](#): > > there is, at times strongly debated, antitrust law, consumer protection, as well as securities regulation, tax law, etc. Of course, a free market is not free unless it is regulated to ensure fair competition. If the “large companies” mentioned in this thread are monopolies, that’s another matter. But monopolies usually try to gouge their customers, not their suppliers. There’s no point in any company demanding terms of business from their suppliers that force all their suppliers out of business. [Next page](https://boards.straightdope.com/t/is-it-normal-for-a-large-company-to-have-a-standing-policy-of-paying-its-suppliers-in-90-days-120-days/990160.md?page=2)