Help! I've Been Left Holding the Bag With Unpaid Vendors

Dear Mike,??

I’m not going to name names, but someone on my leadership team made the executive decision to shaft one of our most important vendors on a recent payment. I handle AP/AR, and we’re now approaching 60-days past the due date. Yesterday, someone from Procurement came in and let me know that we’d need to place a new order with them shortly – but that the vendor had let him know they would be refusing to fill that order because of the overdue payment.???

I ran this up the chain, only to learn that I’m somehow responsible for repairing the relationship. That would be fine if I also had the go-ahead to pay them – but I don’t. The company wants me to make nice without meeting our contractual obligations, and I have no idea how. To be honest, I’m on the vendor’s side here; they’ve been patient and flexible, and I wouldn’t continue to work with a company that wasn’t paying me either.??

They’ve been reliable partners for years, and I’m certain that’s the only reason they’ve allowed us the grace period they have. We’re both relatively small companies in an even smaller industry, and I can’t help but feel that serving as the face for what my company is asking of me (the continued nonpayment) would reflect poorly on my own professionalism in a very public way.??

I’ve tried talking to my leadership team about how this choice is not only straining an important relationship and threatening to impact product delivery, but also broadcasting a bad name for our company. Like I said, it’s a small industry – people talk.???

I imagine that there’s some reason we’re not paying them – there's got to be something going on that’s making our immediate cash flow more important than vendor payments, product deadlines, etc., but I’m not privy to that information. I don’t want to press, nor do I feel the need to; I just don’t want to be the person responsible for keeping up this effort to wheedle our way into the good graces of the vendor despite the lack of compensation. It feels manipulative and, frankly, it violates my sense of fair play.??

I feel like my job here is to persuade my leadership team to rethink their strategy and stress the importance of keeping this vendor partnership strong, but even that is more than I feel comfortable doing. I don’t think I should have to tell my superiors that this isn’t how we do business. But apparently, I do – or do I? This is where I need you. What’s my brief here? What would you do in my position???

Looking forward to your advice,??

Reluctant Referee??

Dear Ref,?

Sorry to break it to you, but apparently this is the way your team does business if this is how leadership handles things. Therefore, I think you need to change the question you’re asking. It’s not, “Is this how we do business?” It’s, “Is this an anomaly or is this a broader issue, and what are we going to do about it?” The answer will determine if you can do your job effectively.??

Transparency is free, and it’s a valuable commodity to trade in relationships

If it’s just one vendor that your company isn’t paying, there may be a reason for that. If it’s more than one, there’s likely a cash flow issue – and you and your team need to be made aware of that so you can manage these relationships going forward. Right now, everyone – vendor or employee – is likely wondering the same things.??

• What’s going on??

• When can you pay??

• How much can you pay??

• When is the payment expected??

Everybody in the equation should be privy to the answers to these questions. Truthfully, Ref, you’re in a tough position. You’ve been put in a situation where you either need to give this vendor money or transparency – but you haven’t been empowered to do either. If your company doesn’t have the money then they don’t have the money, but that doesn’t mean there isn’t anything you can give.??

Transparency is free, and it’s a valuable commodity to trade in relationships. It establishes the foundation for trust, as well as the appropriate expectations for communication and reciprocal behavior going forward. It’s free because it works. It’s the only way to sustain this relationship, and it’s exactly why you need to get clarification from your leadership team on the question above. It’s fine that they expect you to play the role of messenger, but you need to have a message to deliver and, in this case, that message needs to be an action plan.??

Do not try to pretend that the problem doesn’t exist

The worst thing you can do right now is nothing. You may not have answers for the vendor now but let them know you’re working to get them, and for god’s sake, do not try to pretend that the problem doesn’t exist. Communicate clearly. “Hey, I don’t have the answers for you, but these are the steps I’m taking to get them. I expect to have an update by X.” And then actually follow up with them on that date and let them know what progress has been made. If you keep the channels open and offer transparency, you increase the likelihood of things working out. They may still decide to stop doing business with you at some point if your leadership team doesn’t change their tune, but at least you’ll know that you dotted your i’s and crossed your t’s.?

Best of luck, Ref,?

Mike?

In today's business climate, it’s healthy to feel unsure at least a few times a week. If you’d like some input on a difficult workplace scenario, send a DM or leave me a question anonymously. Over 25 years as a serial fintech entrepreneur, I've averted my share of disasters. Schedule a consultation with me and we can outsmart your avalanches together.