5 ms·

I want to highlight this paragraph: Freeze all payments that would not result in an outage: rent, non technical vendors, professional services, etc.

by ido 4y ago

I want to highlight this paragraph: Freeze all payments that would not result in an outage: rent, non technical vendors, professional services, etc. You’ll get back to them in a more discriminate way in a couple of weeks, once you have a clearer overall plan Is the author suggesting screwing over the companies you buy services from by not paying them?

kingkongjaffa 4y ago
Most B2B are on 30/60/90 day payment terms anyway. You should be able to get your shit together in 30days without delaying any payments. The more prudent thing would be to scrap all subscriptions/SAAS solutions you can live without, with one month notice where you are not contracted, where you are see how to activate any break-clauses etc. So this month you pay the same but maybe next month you cancelled some nine essential stuff and your burn rate is 1-10% leaner? shrug
bjornsing 4y ago
> Is the author suggesting screwing over the companies you buy services from by not paying them? In a bankruptcy or restructuring someone is going to get screwed. That’s sort of the definition of it.
- hef19898 4y ago
  Usually that happens undet proper bancruptcy proceeding (Chapter 11 or some variety of that depending on jurisdiction).
simonebrunozzi 4y ago
Yes. As hard and unfair as it sounds, if you have finite resources and too many expenses, at some point you have to take drastic decisions. The big difference is in how you handle them "in a couple of weeks". You can totally screw them, or you can honor their credits.
- ido 4y ago
  How do you know you will actually have money in a couple weeks?
  - javawizard 4y ago
    If you wouldn't have money in a couple of weeks, how does this make any difference?
    - hef19898 4y ago
      Delaying bacruptcy can, and has, landed people in jail.
    - ido 4y ago
      It may not to you, but your unpaid vendors would know to not wait on you hoping you'll pay up at the end & try to figure out a backup. If I was providing services to a company I'd much prefer they tell me they're unable to pay ASAP then just delay as much as they can and then not pay at the end.
- hef19898 4y ago
  Doing so ruins a companies financial crediability, and it is opening thr door for your vendors to sue you for delaying bancruptcy. You can ask for drlayed payments as part of restructuring, unilaterally stopping payment is a sure way to disaster.
- ehnto 4y ago
  Just keep them in the loop so you don't end up with a nasty surprise of your own. I have dealt with this scenario from both sides, and suppliers are often pretty well situated to ride out a few missed payments. But by the nature of your situation, you are in no position to be shopping around for a new service should they cut you off for non-payment. Keep people on your side by being communicative as early as possible.
- wirrbel 4y ago
  Either you default or you honor your credit and potentially rebalance credit. I your business was operated responsibly you shouldn’t be in a situation where you stop all payments to „sort out your business numbers“
gillesjacobs 4y ago
The freelance contractors at the start/scale-up where I previously worked did not get payed for 5 months (some even 9 months). Only after Series A completed did they get their bills paid.
- gwnywg 4y ago
  Wow, this is shocking... I guess they had other customers who were paying them so they could afford to keep betting for 9 months? I would have to stop providing services to customer who would not pay one invoice, but I'm probably too junior to judge.
- texasbigdata 4y ago
  Having actually worked as a financial advisor in “restructurings” aka bankruptcies, many (most?) of the comments in this sub thread are not correct. Pre-petition, post-petition and restricted payments (say management bonuses a few weeks before bankruptcies which are ellgibile for claw back) are treated differently. There is a strict order of preference (priority) which can be found in the bankruptcy code. Generally, employee wages are sacrosanct. What ends up happening with vendors is the following: “hey guys everything pre petition is washed, but here’s 2 cents on the dollar for your claim, AND the bankruptcy court has allowed us to use cash collateral to keep using you, soooooo, since it’s a sunk cost, how about you keep servicing us? And when we emerge the bk court requires a test of financial validation to our plans so you’ll know for sure we’re safe. “. As unfair as that is, many/most vendors take the deal. A large vendor will have a certain small %age of their customers go bk every year so they’re generally sophisticated and know how to play the game. Same for landlords. Also the unsecured creditors have a committee through which they voice their concerns. Further, if you play games and try to not sign the bk papers as a debtor, 7 creditors can band together and force you in, which doesn’t usually happen because of the game theory around that. But basically, as a general rule, don’t fuck around. Your scenario as described is unethical, and a virtuous investor would have topped up those delinquent payments with some premium since those employees essentially funded the company with financing. In a bk, you also have access (I won’t explain this) to debtor in possession financing which is super senior to everything except basically tax liens iirc, and if there’s a working capital deficit like the wages mentioned in your case, those can be resolved. The courts are very very strict on the bright line on pre and post petition spend and liabilities and shenanigans aren’t really tolerated. Also, the “zone of insolvency” brings significant liability to officers and directors of the company, and D&O insurance won’t always protect you against risk of this magnitude, so it’s best to steer far far away from unseemly behavior in any liquidity constrained situation. Those refs bite, and they bite hard. Sorry you had to go through that.
Closi 4y ago
> Is the author suggesting screwing over the companies you buy services from by not paying them? Some companies play this game all the time - I’ve even heard it referred to as “supplier stretch”. They pay eventually, but late to improve cash flow. The flip side is when they come to renegotiate their contract, you take late payment into account in the new offer, and they have hurt the relationship, so it’s not a particularly long term strategy (and once you have started, it can be hard to pull back to a position where you aren’t late for everything depending on cash flow).
- hef19898 4y ago
  Some companies do it intentionally. Some do it out of sheer incompetence in the procurement and accounts payable departments / processes. Personally, I almost prefer the first option, it is somewhat easier to recover from.
- ehnto 4y ago
  You also don't get to dictate the suppliers response to stretching them. If you keep stretching me, one day I'm going to be fed up and not send a shipment until you've paid. If you're truly running it tight like many are, you may have been relying on selling that stock to pay for it, shoot that's a bad spot to be in. As I've said in other comments though, keep people in the loop and you'll have a much better time. Communicate first and make decisions based on the outcomes of that. Maybe the outcomes the same, and you don't get sent the goods, that's fine at least you know ahead of time and can react.
- doctor_eval 4y ago
  > They pay eventually, but late to improve cash flow. I‘ve never understood this. If you stretch creditors out to say 120 days, then you only gain the difference in value between the amount owed today vs the same amount in 4 months, which is next to nothing. Once you’ve stretched a creditor to their limit, your payments occur at the same frequency as they would if you didn’t stretch them. So it provides a very marginal one-time benefit, at the cost of pissing off companies you need. I mean, stretching creditors will make your bank balance look fatter, but it doesn’t mean anything because the trade creditor liabilities will remain on your balance sheet, and it’s your balance sheet that counts. Of course, it might be desirable to have cash in the bank if you’re sailing close to the wind, but you’ll be sailing close to the wind when those debts become past due, too.
cyrilgrislain 4y ago
I am suggesting that if your company is on track to DIE, then your utmost duty is to save YOUR company.

by ido 4y ago

kingkongjaffa 4y ago

Most B2B are on 30/60/90 day payment terms anyway. You should be able to get your shit together in 30days without delaying any payments. The more prudent thing would be to scrap all subscriptions/SAAS solutions you can live without, with one month notice where you are not contracted, where you are see how to activate any break-clauses etc. So this month you pay the same but maybe next month you cancelled some nine essential stuff and your burn rate is 1-10% leaner? shrug

bjornsing 4y ago

> Is the author suggesting screwing over the companies you buy services from by not paying them? In a bankruptcy or restructuring someone is going to get screwed. That’s sort of the definition of it.

hef19898 4y ago
Usually that happens undet proper bancruptcy proceeding (Chapter 11 or some variety of that depending on jurisdiction).

simonebrunozzi 4y ago

Yes. As hard and unfair as it sounds, if you have finite resources and too many expenses, at some point you have to take drastic decisions. The big difference is in how you handle them "in a couple of weeks". You can totally screw them, or you can honor their credits.

ido 4y ago
How do you know you will actually have money in a couple weeks?
- javawizard 4y ago
  If you wouldn't have money in a couple of weeks, how does this make any difference?
  - hef19898 4y ago
    Delaying bacruptcy can, and has, landed people in jail.
  - ido 4y ago
    It may not to you, but your unpaid vendors would know to not wait on you hoping you'll pay up at the end & try to figure out a backup. If I was providing services to a company I'd much prefer they tell me they're unable to pay ASAP then just delay as much as they can and then not pay at the end.
hef19898 4y ago
Doing so ruins a companies financial crediability, and it is opening thr door for your vendors to sue you for delaying bancruptcy. You can ask for drlayed payments as part of restructuring, unilaterally stopping payment is a sure way to disaster.
ehnto 4y ago
Just keep them in the loop so you don't end up with a nasty surprise of your own. I have dealt with this scenario from both sides, and suppliers are often pretty well situated to ride out a few missed payments. But by the nature of your situation, you are in no position to be shopping around for a new service should they cut you off for non-payment. Keep people on your side by being communicative as early as possible.
wirrbel 4y ago
Either you default or you honor your credit and potentially rebalance credit. I your business was operated responsibly you shouldn’t be in a situation where you stop all payments to „sort out your business numbers“

gillesjacobs 4y ago

The freelance contractors at the start/scale-up where I previously worked did not get payed for 5 months (some even 9 months). Only after Series A completed did they get their bills paid.

gwnywg 4y ago
Wow, this is shocking... I guess they had other customers who were paying them so they could afford to keep betting for 9 months? I would have to stop providing services to customer who would not pay one invoice, but I'm probably too junior to judge.
texasbigdata 4y ago
Having actually worked as a financial advisor in “restructurings” aka bankruptcies, many (most?) of the comments in this sub thread are not correct. Pre-petition, post-petition and restricted payments (say management bonuses a few weeks before bankruptcies which are ellgibile for claw back) are treated differently. There is a strict order of preference (priority) which can be found in the bankruptcy code. Generally, employee wages are sacrosanct. What ends up happening with vendors is the following: “hey guys everything pre petition is washed, but here’s 2 cents on the dollar for your claim, AND the bankruptcy court has allowed us to use cash collateral to keep using you, soooooo, since it’s a sunk cost, how about you keep servicing us? And when we emerge the bk court requires a test of financial validation to our plans so you’ll know for sure we’re safe. “. As unfair as that is, many/most vendors take the deal. A large vendor will have a certain small %age of their customers go bk every year so they’re generally sophisticated and know how to play the game. Same for landlords. Also the unsecured creditors have a committee through which they voice their concerns. Further, if you play games and try to not sign the bk papers as a debtor, 7 creditors can band together and force you in, which doesn’t usually happen because of the game theory around that. But basically, as a general rule, don’t fuck around. Your scenario as described is unethical, and a virtuous investor would have topped up those delinquent payments with some premium since those employees essentially funded the company with financing. In a bk, you also have access (I won’t explain this) to debtor in possession financing which is super senior to everything except basically tax liens iirc, and if there’s a working capital deficit like the wages mentioned in your case, those can be resolved. The courts are very very strict on the bright line on pre and post petition spend and liabilities and shenanigans aren’t really tolerated. Also, the “zone of insolvency” brings significant liability to officers and directors of the company, and D&O insurance won’t always protect you against risk of this magnitude, so it’s best to steer far far away from unseemly behavior in any liquidity constrained situation. Those refs bite, and they bite hard. Sorry you had to go through that.

Closi 4y ago

> Is the author suggesting screwing over the companies you buy services from by not paying them? Some companies play this game all the time - I’ve even heard it referred to as “supplier stretch”. They pay eventually, but late to improve cash flow. The flip side is when they come to renegotiate their contract, you take late payment into account in the new offer, and they have hurt the relationship, so it’s not a particularly long term strategy (and once you have started, it can be hard to pull back to a position where you aren’t late for everything depending on cash flow).

hef19898 4y ago
Some companies do it intentionally. Some do it out of sheer incompetence in the procurement and accounts payable departments / processes. Personally, I almost prefer the first option, it is somewhat easier to recover from.
ehnto 4y ago
You also don't get to dictate the suppliers response to stretching them. If you keep stretching me, one day I'm going to be fed up and not send a shipment until you've paid. If you're truly running it tight like many are, you may have been relying on selling that stock to pay for it, shoot that's a bad spot to be in. As I've said in other comments though, keep people in the loop and you'll have a much better time. Communicate first and make decisions based on the outcomes of that. Maybe the outcomes the same, and you don't get sent the goods, that's fine at least you know ahead of time and can react.
doctor_eval 4y ago
> They pay eventually, but late to improve cash flow. I‘ve never understood this. If you stretch creditors out to say 120 days, then you only gain the difference in value between the amount owed today vs the same amount in 4 months, which is next to nothing. Once you’ve stretched a creditor to their limit, your payments occur at the same frequency as they would if you didn’t stretch them. So it provides a very marginal one-time benefit, at the cost of pissing off companies you need. I mean, stretching creditors will make your bank balance look fatter, but it doesn’t mean anything because the trade creditor liabilities will remain on your balance sheet, and it’s your balance sheet that counts. Of course, it might be desirable to have cash in the bank if you’re sailing close to the wind, but you’ll be sailing close to the wind when those debts become past due, too.

cyrilgrislain 4y ago

I am suggesting that if your company is on track to DIE, then your utmost duty is to save YOUR company.