Appearing in last week’s Financial Times, John Gaunt, the policy and technical director at the Association of Corporate Treasurers, advised business to look after their supply chains when it comes to tightening up on working capital.
The article quotes him: "If your supplier is suffering liquidity problems because he is losing orders and paying late, you may need to get involved with him to help him survive".
Remarkably, the ACT urges companies to consider intervening directly with the banks of a less creditworthy supplier to help convince the lender that the supplier can meet sales targets and book receivables by a certain date.
"Particularly if you don't borrow from your supplier's bank it's using your credit standing to reduce your total supply costs," he explains.
For my money it seems a rather fanciful proposition that, in all but the most critical of supplier relationships, many businesses are going to even consider acting as a guarantor for their suppliers.
