I was the new CFO at a pharmaceutical firm.  It was the first day on the job and there was no grace period.  The company had a rough first year and cash was tight.  I didn’t even need to look at the balance sheet to know that.  Just the number of phone calls from vendors was a good clue.

 

So what to do, take the phone calls or not take the phone calls.  I’ve seen similar situations later in my consulting life.  Usually one of two things happen:

 

·         The phone calls aren’t taken and the situation escalates.

·         Calls are taken, but suppliers are given promises the company can’t keep, deteriorating the relationship even faster.

 

At different times, one or the other was used by my predecessor.  As I would soon learn, relationships with the suppliers were sinking, if not already completely down the drain.

 

I chose a different route than hiding under the desk and dodging the calls.  I used my new kid on the block card to buy time.  I took the calls, explained to the supplier that I was brand new and I asked them to explain their situation, specifically, where did we stand with them and what had we been told.  I said I would be working out a plan of action and be back to them shortly.

 

After hearing from the majority of the significant suppliers, I had what I needed to know to put a program together.  I worked out arrangements to get them paid off in 2-3 months, while getting new systems of materials resumed.  The new shipments would be paid for on time.  Meanwhile, on the other side of the fence, I stepped up collections on receivables and lined up additional financial from our private equity investors.

 

It’s no fun to be the whipping boy on the phone and take phone calls from irate suppliers.  However, it beats blowing off the phone calls and getting crucified later.  Take the calls and be straight with your suppliers.  That can pay off in the long run.

                                                      

It did for us.  As we got out of the hole, the chemical distributors remembered how we rescued them from a situation that could have been very costly write offs to them.  When we got an RD program started, we got first crack at a number of chemicals on pharmaceuticals to come off patent.  The goodwill we created paid off handsomely.