According to an article on Publisher’s Weekly’s website, the once-powerful Borders bookselling chain has suspended payments to suppliers due to cash flow problems. Of course, its major suppliers have cut off shipments until they are paid.

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The result? A nearly 20% one day drop in Border’s stock price.

Ouch.

Now, Borders might be in dire financial straits. But many organizations are less than diligent with supplier payments even when they are healthy.

Because this matter with Borders makes it clear that ability – or even perceived ability – to pay suppliers can be a powerful indicator of financial health, you should be able to understand how a procurement department can positively or negatively impact stock price by its supplier payment policies and practices. Pay those suppliers in accordance with your agreements and support a high stock price for your organization!

Why is stock price important?

Well, a significant percentage of most publicly-held company’s senior management’s net worth is dependent on stock price. You wouldn’t want your CEO upset with you because late supplier payments wiped out 20% of her net worth would you?