Mike Buetow

It wasn’t that long ago, as I recall, that one of the Tier 1 EMS companies was holding its quarterly conference call. Camped on were the all the corporate “Cs” – chief executive, chief financial officer, chief operating officer – along with a bevy of financial analysts who are paid handsomely to assess whether other Wall Streeters should invest in said EMS.

For the uninitiated, these events are generally pretty straightforward affairs. The company management lays out their financials from the previous quarter, often reading from a heavily vetted press release. The analysts then ask questions, most of which follow the general narrative suggested by the company’s press release. Unless you have truly spit the bit, these are not painful moments.

Say this about analysts: they don’t like to look foolish, especially not in front of their peers. So these crack seers tend to share an institutional cautiousness when it comes to questioning their hosts. For example, if the company says its profits dipped because wages went up in some country where it employs 150,000 or so workers, the analyst might ask whether the company has, “perhaps maybe,” talked to its customers about “possibly sharing” those higher labor costs.

Not everyone can be a grizzled tech reporter.

Now, one number that gets shared on almost all these calls is the company’s “days payable.” What “days payable” refers to is a company’s average payable period, or in simpler terms, how long it takes a company to pay its bills. If that number goes down, it means the company is paying its suppliers faster. If that number goes up, it means the company is taking longer to pay its suppliers. Some companies treat this as a key “performance” metric.

So it went, then, that on one such call, the Tier 1 EMS noted its days payable figure had fallen to something like 68 days from something like 72 the previous quarter.
And one such Wall Street analyst/schmo asked the Tier 1 EMS CEO if he thought the company could get that number back up over 70 days, to which the CEO, ever the generous type, replied something to the effect of, “Well, that was sort of a one-time thing … eventually we do have to pay them.”

Wall Street actually rewards them for this. Handsomely.

Truth be told, given some of the tales I’ve heard, 70 days isn’t all that crazy.

One major US-based defense contractor demands net 120 day terms prior to a vendor even submitting a quote. Four months.

Then there was the components supplier that had a reciprocal agreement with a customer under which the customer was also supplying the supplier. (The electronics supply chain is a complex animal.) The customer put the components supplier on credit hold for not paying within two weeks, even though the customer was 90 days behind in paying the components supplier. Perhaps their AP department should have written the check to themselves.

Not everyone is in sloth mode. An industry friend tells me their company sent an invoice (to a major solder supplier), and 11 minutes after hitting SEND, the money showed up in their account. That’s less than one minute for every day it takes the US defense prime to break out its wallet.

What’s the solution? Another friend of mine in this industry took a rather novel approach to a customer that fell way behind on their bills:

He shut them off.

Inevitably they called and asked why their order wasn’t being filled.

“That piece of paper with all those numbers we send you every month? Take a look at how many days behind you are on paying,” he noted.

“But we’re a customer,” the would-be buyer protested.

“Not if you don’t pay me,” he replied.

Nothing is free, it seems, except my advice.

P.S. Well, one thing is free: nearly 20 free sessions on topics ranging from signal integrity to PCB panel optimization next month at PCB West in Santa Clara.

P.P.S. OK, it’s not completely free. You have to pay for the gas to get there. But the coffee’s on us.

Register now for PCB West, the Silicon Valley's largest trade show for the printed circuit industry, taking place Sept. 13-15 in Santa Clara: PCBWEST.COM

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