Supplier Solvency Warning Signs<\/h3><\/div><\/div><\/div>PurchTips edition #395<\/p>\n<\/div>
How Do You Know If Your Supplier Is In Financial Distress?<\/h4><\/div><\/div><\/div>With publicly-held suppliers, it is relatively easy to identify when they are having financial trouble. You acquire their latest annual or quarterly reports online and apply your financial statement analysis skills to determine how healthy they are.<\/p>\n
With privately-held suppliers, your access to information is far more restricted. However, here are three warning signs to look for to determine if one of your privately-held suppliers is experiencing financial duress. They don\u2019t necessarily guarantee that a supplier is hurting, but they should compel you to conduct a closer examination of a supplier\u2019s solvency.<\/p>\n
Cutbacks Affecting The Supplier\u2019s Identity.<\/strong>\u00a0 Think about how some of your suppliers identify themselves.\u00a0 A supplier may be the only one in their industry offering 24\u00d77 support.\u00a0 Or a lifetime warranty.\u00a0 Or some other benefit that obviously costs money, but has made that supplier the best known name in their field.\u00a0 Cutbacks are naturally always going to be part of a business.\u00a0 But when a supplier starts cutting back on the very thing that attracted customers in the first place, it could be a sign of desperation \u2013 that cuts in less important areas weren\u2019t enough to sustain the supplier.<\/p>\nThe 3 CFO Rule.<\/strong>\u00a0 A key to financial stability and growth is having a steady hand managing the company\u2019s money.\u00a0 That\u2019s usually the job of the Chief Financial Officer.\u00a0 It\u2019s not unusual for a CFO to depart for a better job or retirement.\u00a0 But if a company goes through three CFO\u2019s in 2-3 years, it could be a sign that money isn\u2019t being managed well and the people who are hired to fix certain problems simply can\u2019t fix those problems.<\/p>\nDesperate Supplier Communication.<\/strong>\u00a0 New suppliers will aggressively offer discounted pricing to get their \u201cfoot in the door\u201d of a market already occupied by incumbents.\u00a0 But when an established supplier starts behaving like a new one, it can be concerning.\u00a0 Financially healthy suppliers will walk away from deals that are bad for them.\u00a0 As much as we in procurement love low prices, it\u2019s troubling if a once-strong supplier recklessly offers discounts to the point where you know there is very little profit margin left for them.\u00a0 A healthy profit margin is key for a supplier\u2019s long term solvency.\u00a0 Having a supplier go bankrupt when you are counting on them to perform won\u2019t be justified by savings you achieved earlier.<\/p>\n<\/div><\/div><\/div><\/div><\/div>Want A More Rewarding Procurement Career?<\/h5><\/div>![](\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2021\/04\/career.jpg\" "\\"career\\"")
<\/span><\/div>Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n
Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>
PurchTips edition #395<\/p>\n<\/div>
How Do You Know If Your Supplier Is In Financial Distress?<\/h4><\/div><\/div><\/div>With publicly-held suppliers, it is relatively easy to identify when they are having financial trouble. You acquire their latest annual or quarterly reports online and apply your financial statement analysis skills to determine how healthy they are.<\/p>\n
With privately-held suppliers, your access to information is far more restricted. However, here are three warning signs to look for to determine if one of your privately-held suppliers is experiencing financial duress. They don\u2019t necessarily guarantee that a supplier is hurting, but they should compel you to conduct a closer examination of a supplier\u2019s solvency.<\/p>\n
Cutbacks Affecting The Supplier\u2019s Identity.<\/strong>\u00a0 Think about how some of your suppliers identify themselves.\u00a0 A supplier may be the only one in their industry offering 24\u00d77 support.\u00a0 Or a lifetime warranty.\u00a0 Or some other benefit that obviously costs money, but has made that supplier the best known name in their field.\u00a0 Cutbacks are naturally always going to be part of a business.\u00a0 But when a supplier starts cutting back on the very thing that attracted customers in the first place, it could be a sign of desperation \u2013 that cuts in less important areas weren\u2019t enough to sustain the supplier.<\/p>\nThe 3 CFO Rule.<\/strong>\u00a0 A key to financial stability and growth is having a steady hand managing the company\u2019s money.\u00a0 That\u2019s usually the job of the Chief Financial Officer.\u00a0 It\u2019s not unusual for a CFO to depart for a better job or retirement.\u00a0 But if a company goes through three CFO\u2019s in 2-3 years, it could be a sign that money isn\u2019t being managed well and the people who are hired to fix certain problems simply can\u2019t fix those problems.<\/p>\nDesperate Supplier Communication.<\/strong>\u00a0 New suppliers will aggressively offer discounted pricing to get their \u201cfoot in the door\u201d of a market already occupied by incumbents.\u00a0 But when an established supplier starts behaving like a new one, it can be concerning.\u00a0 Financially healthy suppliers will walk away from deals that are bad for them.\u00a0 As much as we in procurement love low prices, it\u2019s troubling if a once-strong supplier recklessly offers discounts to the point where you know there is very little profit margin left for them.\u00a0 A healthy profit margin is key for a supplier\u2019s long term solvency.\u00a0 Having a supplier go bankrupt when you are counting on them to perform won\u2019t be justified by savings you achieved earlier.<\/p>\n<\/div><\/div><\/div><\/div><\/div>Want A More Rewarding Procurement Career?<\/h5><\/div><\/span><\/div>Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n
Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>
With publicly-held suppliers, it is relatively easy to identify when they are having financial trouble. You acquire their latest annual or quarterly reports online and apply your financial statement analysis skills to determine how healthy they are.<\/p>\n
With privately-held suppliers, your access to information is far more restricted. However, here are three warning signs to look for to determine if one of your privately-held suppliers is experiencing financial duress. They don\u2019t necessarily guarantee that a supplier is hurting, but they should compel you to conduct a closer examination of a supplier\u2019s solvency.<\/p>\n
Cutbacks Affecting The Supplier\u2019s Identity.<\/strong>\u00a0 Think about how some of your suppliers identify themselves.\u00a0 A supplier may be the only one in their industry offering 24\u00d77 support.\u00a0 Or a lifetime warranty.\u00a0 Or some other benefit that obviously costs money, but has made that supplier the best known name in their field.\u00a0 Cutbacks are naturally always going to be part of a business.\u00a0 But when a supplier starts cutting back on the very thing that attracted customers in the first place, it could be a sign of desperation \u2013 that cuts in less important areas weren\u2019t enough to sustain the supplier.<\/p>\n The 3 CFO Rule.<\/strong>\u00a0 A key to financial stability and growth is having a steady hand managing the company\u2019s money.\u00a0 That\u2019s usually the job of the Chief Financial Officer.\u00a0 It\u2019s not unusual for a CFO to depart for a better job or retirement.\u00a0 But if a company goes through three CFO\u2019s in 2-3 years, it could be a sign that money isn\u2019t being managed well and the people who are hired to fix certain problems simply can\u2019t fix those problems.<\/p>\n Desperate Supplier Communication.<\/strong>\u00a0 New suppliers will aggressively offer discounted pricing to get their \u201cfoot in the door\u201d of a market already occupied by incumbents.\u00a0 But when an established supplier starts behaving like a new one, it can be concerning.\u00a0 Financially healthy suppliers will walk away from deals that are bad for them.\u00a0 As much as we in procurement love low prices, it\u2019s troubling if a once-strong supplier recklessly offers discounts to the point where you know there is very little profit margin left for them.\u00a0 A healthy profit margin is key for a supplier\u2019s long term solvency.\u00a0 Having a supplier go bankrupt when you are counting on them to perform won\u2019t be justified by savings you achieved earlier.<\/p>\n<\/div><\/div><\/div><\/div><\/div> Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>Want A More Rewarding Procurement Career?<\/h5><\/div>
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