Implementing a World Class Purchasing Organization

It has been the norm for companies to pay vendors as late as possible. If the vendor has a contract for 45 days then they would never receive their payment before that 45th day. To encourage companies to pay their bills prior to the negotiated contract date, vendors have offered rebates, discounts and other incentives. But vendors have found that despite the incentives, companies still are not paying early. One theory is that companies enter the payment terms into their ERP system and forget about it. Checks are cut based on that data and the vendor incentives are never realized. A world class purchasing strategy should embrace these discounts and companies should make sure that they are taking every incentive possible. In these difficult economic times, companies cannot afford to pass up significant discounts. In addition, negotiations with vendors should also include obtaining greater discounts for payment on receipt of goods or even pre-payment.