This letter should be used when a customer declares that they will be paying you in "their" terms, which are longer than, and not consistent with, your selling terms.

We've been hearing increasingly lately about customers sending notices to suppliers informing them that they are simply going to be taking longer to pay.

In fact, in some situations, it might even be advantageous for better-capitalized suppliers to, in essence, become a "bank of last resort" and use that as a marketing opportunity to both a) gain market share, and b) help some segment of their customer base survive during hard times.

But not everyone can, or should, allow this type of blanket demand by a customer. For some, margins might be too low. And the fact of the matter is SUPPLIERS, set sales terms.

First, recognize that what you do in response to such a request is first and foremost a business decision, in particular a marketing decision.

In general, terms are set by the marketplace - i.e., whatever is standard in your particular market. Second, once you understand what customers expect in your particular marketplace, management might make a decision that terms can be used to facilitate some other marketing goal, and of course, they'll factor in the cost of doing so.

But when a customer sends a notice informing you that they're going to pay all suppliers in xx days, a number of questions need to be asked at this point. How important is this customer to you? What are your margins? What kind of leeway do you have to allow late payments (ie, your own cash flow issues)?

Even if the customer is a big customer, it still might be a bit of bluster on their part, kind of a "bombs away" maneuver that they don't necessarily expect will work across the board.

Any letter such as this should only be sent with senior management's buy-in.