Our credit manager came into my office and asked, "Did you know 'Mr. Big' company has put us on net 90 day terms?" I replied that I was not aware of it, but I was not surprised.

Some announce it by letter, some by phone and others just quietly change the terms on the mailed acknowledgment purchase order and trust we read the fine print. Any way you look at it, it's either play the game or lose the accounts.

It seems that banking regulations have quietly changed to make industrial distributors into zero percent interest, short-term moneylenders for major corporations. After first asking for price reductions, then asking for measurable cost reductions, customers are now quietly dictating the extension of payment terms to their suppliers.

On the supply side, vendors are tightening payment terms for their distribution team or as we prefer to be called, their customers. Rather than a price increase across the board, some suppliers have instituted a selective price increase only for their best customers who pay the their bills promptly in 10 days by reducing or eliminating the cash discount.

The cash discounts ranging, from 1 to 5 percent, added a nice chunk of profit to our bottom line. Our letters of protest have mostly gone unanswered. For those that do answer they contain the words "We did this in order to make us easier to do business with".

So what is "net 30 days"? Net 30 days is a term with multiple and confusing meanings. Does it mean that net 30 days is the day you pay your bill? Is it the day you mail the check? Or, is it the day the supplier receives the check? No matter to whom you talk, they are always 100 percent convinced that their opinion is correct, providing it benefits them.

Currently, our positive cash flow allows us to manage invoice payments in 35 days. We pay our due invoices every Friday afternoon and mail the checks the same day. The majority of our suppliers should receive their payments the following Monday. This is acceptable to most of them.

From others, we hear that their accounts receivable employees are being paid bonuses for bringing the A/R to a real net 30, especially at the end of a month. We have found that vendors' A/R people generally couldn't care less about sales volume. One of our supplier's A/R department has even anticipated our "normal" late payment of net 35 days and put us on "shipment hold" prior to the due date.

The economy is showing signs of a recovery but it still remains unstable. New plant expansion projects are few and far between. Customers want a lot more for a lot less. Our suppliers want more and more orders and they want payment for that product in no more than 30 days.

Since all of this revolves around the distributor, I guess that we must be the nucleus of the problem. Maybe distribution companies trying to stay in business are the real cause of the recession we are experiencing.