Isnt 30ddd better than paying cash in advance ?
It used to be easy to get credit from supplier many years ago (basically you just point to your nose and say : You dont know who i am ?? ) , nowadays they request financial report, ship owner information even your director passport and MRI scan in order to proceed a credit application. After you have a credit terms , however due to freight delay, ship maintenance, sometimes the payment is not on time and how can you maintain your credit rating while have slight delay ?
- Notice in advance
Always let your supplier know you might delay before the due date, its a bad impression from the financial after they send out the 5th payment reminder and you reply them “Actually we can only pay after another 14 days “. Surprise and Uncertainty is the biggest concern from credit department.
2. Give a firm date
In case you really need some more time, try to give a firm date instead of saying “by this month”, as the trader cant tell the financial department ” somewhere this month hopefully will settle “. Also, make sure you can pay on the suggested date, if you promise a payment on 1 Jan and then slide to 11 Jan and 21 Jan, payment sliding is one of the scariest experience from trader / supplier, give the date you can REALLY settle rather than just get rid of the trader on the phone.
3. Calculate interest > Opportunity cost
Nowadays for many trader/ supplier the cost of funding is not as cheap as few years ago, cost of cash is much more expensive when dealing with late payer while trader still have to pay supplier and supplier have to pay terminal to buy cargo. many supplier will charge interest now for some of the overdue invoice and client tend to ignore as it cost zero dollar to change to other channel. However i will also advise you to compare the interest cost with the opportunity cost, lets say if you are direct with the only supplier in a port and now you are late and he is asking for 3000USD interest. You might choose to ignore and go thru another trader , however the trader still need margin so at the end after few transactions you might end up paying more than the original interest invoice.
Hope the above information helpful to you and as always
Until next time !
