Colleagues:
In support of Bob Graham's point about "renegotiating" the terms of an accounts payable amount, let's look at it in a slightly different way. Don't think of it as a company defaulting on a portion of its payment; think of it as a negotiation about future business.
Suppose company "A" owes company "B" $1,000,000 for goods delivered over the past six months. Company "A" goes to company "B" and says, our business is growing rapidly; would you accept $800,000 to clear the account in return for us guaranteeing you $1,250,000 worth of purchases over the next six months? If not, we will pay you the $1,000,000 we owe, but we will also look to widen our netowrk of suppliers and may spend only $500,000 with you over the next six months and $750,000 with your competitors.
If I am interpreting Mr. Graham correctly, I believe it is this kind of negotiation he refers to in his posts. This is clearly not defaulting, just using the leverage of future purchases to get a break on current debts.
Walter High |
