Giving Credit, Where Due --Dickeson
Perhaps it's not so much the significance of the discounting for fast pay but the importance of the receivables inventory to our business. They're an inventory you know. Just like that raw paper in the warehouse. They have such an impact that we're willing to sacrifice an inordinate proportion just to collect quickly.
Hey, that's it. They're subject to the same laws of JIT (Just-in-Time) as raw, process and finished goods. That's why we're so pleased when the customer will supply the paper. We don't have the burden of paper in the receivables inventory. In a sense, we've collected in advance for it. The customer isn't tying up our money in receivables inventory!
That's why accumulating inventories has prime significance to the nation's economy. If you're an acquiring company, the first thing you look at in your due diligence exercise is the inventories, especially the raw materials and receivables. That's where the sins of the past business policies and practices lie buried.
The first thing I'd look at as a criterion of effective management in any printing business: how fast do they get their invoices for completed jobs in the e-mail (e-mail can be a day or two or even three faster than snail mail.) The invoice should precede the packing slip! Then a phone call to the customer to be sure they've received it, that it's clear and when you can schedule payment. The date on that invoice starts the quick-pay period clock running. None of this horse-puckey of waiting for all of the so-called costs to be reported. That's distorted history.
Price, customer changes and count are all we need to know. If we don't know them instantly, then we'd better crank up the computer system. I recall with sadness one printing leader, no longer in the business, saying, "Try as we might, Rog, we can't get our invoices out in less than 14 days."