I am about to reveal something that everyone knows, but no one wants to say out loud.
Your customers know this. Your suppliers know this. Even your own staff knows this. But it shall never be spoken of.
Well, I am heavily caffeinated and old enough to have no filters anymore, so I am going to blurt it out anyway.
Your Accounts Payable department is out of control and ruining your company’s reputation.
Here’s the scenario: you hire a supplier to do something or provide a product; it could be raw materials or a supporting service, like training or maintenance. You negotiate with that supplier and develop a contract or purchase order, covering what will be delivered, when, and under what terms and conditions. You agree on pricing, due dates, and payment terms. Then, you sign the contract and/or submit the purchase order, both of which are now legally binding contracts enforceable under contract law.
The supplier provides the service or ships the product to you. You receive it. All’s well.
Then the supplier submits his invoice. This is routed to your AP department, who, suddenly, cares not one bit about the contract, the purchase order, or the terms and conditions you spent time negotiating and signing. They are not trained in contract law, so they just pretend it doesn’t exist.
Maybe they pay on time. More often than not, they ignore the terms entirely and default to some unwritten, mythical “policies” that say the company’s payment terms are actually Net 180, not the Net 15 you negotiated. Then, their “net” date is just the rough approximation of the week they might run checks, anyway. They mail a check, and perhaps the Post Office delivers it. Perhaps not. Whatever.
It’s 2026: no one uses paper checks anymore. Just stop!
And now, you know what happens? No one wants to work with your company anymore. Because if your AP folks don’t believe in contract law, don’t honor legally binding agreements, invent their own made-up rules, and then force your suppliers to act as de facto loan lenders for your company, that destroys any and all goodwill you might have built up with that supplier.
You see, if a contract says the terms are Net 15, then your “internal policies” don’t magically erase that. I can have a “policy” that says I can steal your car and pee on your plants, but the laws trump my policy and will throw me in jail if I do it. So, no, AP: your policies have no legal authority over an actual contract.
In the ISO certification world, this happens all the time. The provider negotiates a contract and terms, performs the work, provides the deliverables, pays for expenses out of pocket, and then waits for four or five months to get paid. During that time, the client has received their ISO 9001 certificate and has no real reason to pay at all now.
The ugly solution is to demand 50% or more of the payment up front, which only ensures that clients never hire you. They won’t sign up for that agreement.
I have to be honest, this doesn’t happen much to Oxebridge anymore. I’ve put in guardrails to prevent this scenario to a great extent. Every contract has a clause that requires the client to notify their Accounts Payable people of the contract and terms, making it doubly binding. Next, my procedures require me to literally speak with AP upon the signing of the contract, to notify them of the terms and get me set up in their supplier system before work begins. If AP balks, we cancel the contract immediately, and the AP folks can take the heat.
Next, I’ve stopped accepting checks entirely. That call with AP is to get us set up for direct deposit and, again, if AP balks, we drop out before work starts.
I’ve also implemented a blacklist for companies that pull shenanigans like the “it will go out in the next scheduled check run” scam. AP can manually make a payment; they just don’t want to.
Of course, companies make a lot of money by holding money in their accounts, gaining interest, which is free money they’d lose if they paid their bills on time. Just imagine how much money a large company makes with this scam: a few weeks of interest on every invoice, multiplied by every supplier, every week, every month, every year. Not a bad extra revenue stream.
To whatever extent you can, folks, get your AP department in line. They are not immune to contract law and have to follow the rules like everyone else.
Alternatively, you can find new vendors, I guess.
Christopher Paris is the founder and VP Operations of Oxebridge. He has over 35 years’ experience implementing ISO 9001 and AS9100 systems, and helps establish certification and accreditation bodies with the ISO 17000 series. He is a vocal advocate for the development and use of standards from the point of view of actual users. He is the writer and artist of THE AUDITOR comic strip, and is currently writing the DR. CUBA pulp novel series. Visit www.drcuba.world
