The story suggested that Steve had taken inappropriate action in informing the customer that orders were being delayed until the issue of the past due invoices had been resolved. It should come as no surprise, then, to the frequent readers of the CW News that I do not necessarily share the same opinion with some of the conclusions reached in this story. I do agree, however, with the following conclusions.

Poor communication existed within the ABC Electronics organization, credit and sales were not working as a team and the credit department was unaware of the particulars of the contract between the two parties.

What I do not agree with is that a just-in-time inventory contract makes it basically impossible to hold orders unless the account is seriously in default. What constitutes “seriously in default”, is it 1, 15, 30, or 90 days past due? When an invoice becomes one day past due, unless otherwise agreed to, a breech of the agreement occurs.  Thus, the agreement is, at the very least, suspect as to the validity of any future business under the agreement. In fact, §2-609(1) of the Uniform Commercial Code reads, in part, “ A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired.” §2-609 and §2A-401 further provides for the contract to be repudiated if either party to the agreement fails to provide the other adequate assurance they can perform under the terms of the agreement.

I do not agree that Steve made any error in judgment in his conversation with Marsha, the accounts payable clerk, at Brown. The fact is Steve was holding orders until the past due was resolved and he had a moral obligation to inform the customer that orders were being delayed.  I do find fault with Steve contacting Marsha. My Momma taught me that people identify you by the people you associate with. We constantly strive to be professional and whine when we are not treated as professionals yet we continue to spend our time dealing with non-professionals. Accounts payable is a clerical position and we still haven’t figured out they have no authority when it comes to paying our invoices. We should be contacting the professionals within the organization who have authority to tell accounts payable clerks what to do and when to do it. These professionals are purchasing personnel, controllers, chief financial officers, owners and general partners. If you spend your time dealing with clerks you will not only be considered a clerk but payment problems will continue.

I do not agree that Brown should have been treated any differently regardless of their size. An ongoing problem within many organizations is they fail to look beyond the amount of orders being placed by a concern until it is too late. Steve Morgan acted accordingly based on the facts presented.  He had a customer who consistently paid beyond agreed terms of sale and was now 7 days (a week) beyond their normal slow pay, clearly a warning sign of possible trouble.  One has to wonder what the reaction of the VP of Finance and Sales Manager would have been had Steve not acted and then the large and important customer defaulted or filed bankruptcy.

When will we realize both as professionals and an organization that it is not the seller or credit department who holds a customer’s order? It is the customer who delays the processing of their orders by either not abiding by the terms of the sale or failing to initiate communication with credit personnel the reasons for paying late.

One has to wonder how vendor credit managers fared after the failure of Service Merchandise, Montgomery Ward, Fleming Foods, Eastern Airlines, and the list goes on and on and on, all customers who at one time were “LARGE and IMPORTANT”.  

I wish you well.   .   

This information is provided as information only and not legal advice. Legal advice should be obtained from a competent, licensed attorney, in good standing with the state bar association.