In fact, most suppliers will tell you the hits are more like body blows than toe-tapping tunes.

Chances are, you’ve already formulated back-up plans for key suppliers, by scoping out and maybe even contacting alternate sources.

But the suppliers you rely upon for more specialized goods or products aren’t so easily replaced.

In some cases, it’s in your best interest to lend a helping hand, to keep your own lifeline open.

There are five strategies you could consider, and determine what might work best for you:

• Offer a troubled supplier a bridge loan, which must be secured by a tangible asset like real estate or equipment. If this is the path you choose, tread carefully — you don’t want to obligate your company to end up with a supplier’s white elephant.
• Become a supplier for your supplier. See if you can purchase the raw goods or materials your supplier relies upon, and feed them to the supplier. In return, you get credit or discounts on your own transactions with the supplier.
• Speed up your payments to a supplier. Instead of taking the full net 30, mail the payment sooner, so the supplier can pay its own bills more quickly.
• Offer your company’s expertise, to help advise the supplier in ways to improve business practices. Your people might be able to quickly spy weak spots the supplier might have historically overlooked.
• If nothing else seems  to be working, it’s likely the supplier will consider a price increase. Spend time weighing this against the cost of finding a new, specialty supplier. Many companies opt to pay the new price and stick with a reliable business partner.

Experts recommend a three-step plan:

1. Comb through your list of suppliers and identify the most-critical ones. In many cases, this is likely to be “sole source” suppliers for you.

How much stock do you have?

How long could you exist the stock you have on hand?

Determine how much time and money it would take you to find a new supplier that’ll meet your needs.  Are back-ups available?

Start putting together contingency plans now, before the need becomes extremely urgent.

2. How financially stable are your suppliers? Are they going to be able to survive if the going gets tough? There are factors you can’t control — like other business that don’t pay their bills — that can drive your suppliers out of business. For publicly-held suppliers, financial information is available on-line. For private companies, you’ll have to rely on “intelligence” — are deliveries running later? Short quantities with ”ship you more later” promises? Suggestions to shorten payment terms?

3. Finally, there’s a strategic move you can make now that could pay big dividends down the road.

If there are critical suppliers (or even one) that you know you’ll have difficulty replacing, propose working with that supplier in a mutually beneficial arrangement.

For example, you could buy “ahead” — more than you usually do. This can give a supplier desperately needed cash, and might be enough to tide them over.

Some experts recommend you could even consider investing in the supplier, or buying out the supplier. That might be a bit extreme, but it certainly will keep the pipeline open.

But there are two factors at work today that are making paper-free operations (e-invoicing) much more feasible:

• The cost of the necessary technology is decreasing
• Companies’ interests in cutting costs, with suitable ROI, is increasing

The payoff is handsome, according to a recent Aberdeen study.

Best-in-class purchasing operations realized these benefits:

• 91% savings in processing invoices
• 46% trimmed from process cycle time
• 12% drop in late payments, and
• 30% decrease in time responding to inquiries

Need some ammo to make your case with the execs?

There’s a combination of “out with the bad, in with the good” examples that’ll help draw a clear picture of the ROI that can be gained from making steps further into electronic payment processing.

Companies putting electronic payment systems into practice are reporting great improvements in these common problems:

• Long billing cycles. Paper creeps through the mail and through A/P and A/R, often adding up to days or even weeks. That’s without even factoring in lost documents, filing errors, etc.
• Fraud. Paper documents are much easier to alter or substitute. Changes in electronic billing documents leave a trail.
• Visibility. Need to know the status of a transaction? Good luck if it’s on paper. Electronically, it’s just a couple of button punches away.
• Accessibility. One copy of paperwork, one person can use it. What if someone else needs to see it? If it’s paper, it means making copies — which opens the door to problems. If it’s available electronically, everyone can see it at once.
• Storage. Look at the pile of paper you generate every week, and where you have to store it. Ouch. Electronic documents are stored on top of your desk, without the mess.
• Going green. You’ll also do the world a favor by reducing the amount of paper your company consumes.

The number of business-to-business accounts being turned over to commercial collection agencies ran 24% higher in the second quarter of 2008, compared with the same time period in 2007.

That number kept pace with the increase in accounts placed over the past year with the members of the Commercial Credit Agency Association (CCAA).

Accounts placed for collections for the 12-month period ending June 2008 went up by 22%, compared with the 12-month period ending June 30, 2007.

The trend isn’t expected to reverse anytime soon.

If referrals to outside collection agencies continue at this pace, 2008 could end up being the busiest year ever.

CCAA members said it’s been getting tougher to negotiate payments from customers who’ve fell short of goals. The increasing cash flow crunch is making it much more difficult for business debtors to catch up on delinquent debt.

One possible side effect: Increased difficulty in obtaining credit.

It’s anticipated the next quarter will see the stats swing in two directions:

• Finance pros expect a significant increase in the number of accounts turned over to outside collectors, and
• There’ll be an accompanying decline in success collecting those accounts.

In 2007, 18 billion payments were made via Automated Clearinghouse (ACH) — a 12.6% increase over the previous year (for more information, go to www.electronicpayments.org).

ACH payments are growing across the board. Payment sources include:

• business-to-business payments
• banks and financial institutions
• the federal government (including tax withholding)
• payroll direct deposit
• Social Security benefits
• tax refunds
• consumer bills, and several more.

Business-to-business ACH transactions hit 2.5 billion in 2007, an 8.5% increase over 2006 (for more info, go to: www.nacha.org). Companies and U.S. government agencies send payments to (and receive payments from) vendors, trading partners, federal tax withholding obligations, cash management transfers and more.

Accounts Receivable (ARC) check conversion increased 23% — 600 million payments — to a total of 3.5 billion payments in 2007.

The 2007 Federal Reserve Payments Study confirmed that ACH payments had the largest annual growth rate — 18.6% — of all non-cash payments.

Banks and other financial institutions initiated 16.97 billion ACH payments in 2007, about 2 billion over the previous year. This represented a 13.3% increase over 2006. 

How could this occurr?

Of course, Letters of Credit have always been a reliable means of securing transactions. One of main reasons Letters of Credit have been so popular is because they speak one important fact rather loudly: This simple transaction certifies — even promises — that the buyer already has the money in the bank to pay for the transaction, should something go awry.

But there’s been a slight shift in that practice. Why? Because of the advent of electronic purchase processing, done under open accounts.

More and more companies are plugging in to electronic payment capabilities. So more companies are loosening up in accepting payments for smaller purchases. When the transaction is completed, the buyer pays immediately, wired from his bank directly to the vendor’s bank.

But cutting out the middle man also removes some of the visibility in the process, some procurement pros have pointed out. In many cases, though, the lower processing costs of electronic purchases on open account outweigh these concerns.