Unfortunately, if you happen to be a vendor to one of
these companies, you'll find that their increased bottom line is coming at the expense of
yours. These consultants aren't creating wealth, they are simply shifting it from
you to their client!
Generally, with PTO, this shift is so
gradual that you may not notice it for several months. If the company has targeted
your business as a potential "victim," you may not notice that their payments
arrive 2 or 3 days later than usual.
If you do not notice it, you may also not
notice a few months later when the delay goes to 5 or 6 days and then to 8 to 10
days. In conjunction with the slower payments, the customer will often bend over
backwards to maintain good relations with you in other matters.
Who are the usual victims of PTO strategies? Unfortunately, it's most generally our small business clients. The outside PTO strategists often
target the larger companies for their services for two reasons: The larger the
company, the higher the potential payoff (and consulting fees) and, secondly, the large
companies can typically swing their weight much more easily with their much smaller
You do have options if you find your company becoming a victim of
PTO strategies but, unfortunately, they may be limited due to competitive factors.
If it's your largest customers, as is often the case, you obviously have to weigh the risk
that they can obtain better terms with one of your competitors before you take
If you feel that the risk is low, then you should take action immediately
before the payment trend worsens (because under the PTO strategy, if the vendor doesn't
act, it will worsen).
Call the customer on the first day that the payment is beyond your
terms. As always with receivable collections, be friendly, but persistent.
Also, do not hesitate to call the company's Controller, CFO or President. The old
adage that "the squeaking wheel gets the grease" is never more applicable than
in the case of A/R collections..
You should always ensure that your A/R system tracks payments and
produces reports that show a "days paid" history so that you can spot trends. If
you have not already been a victim of a customer's PTO strategy, you most likely will
It is a growing trend across the country because it is a perfectly legitimate
business strategy that benefits well managed companies. As a matter of fact, your
best defense may be a good offense. If you would like to implement a PTO strategy
for your own company, just give us a call. The principles involved are fairly simply
and, as noted above, the bottom line results can often be impressive!