Are Vendors and Customers Checking Up On You?

Kyle Stemple | June 14th, 2010

In better economic times, banks were the only ones concerned with the financial statements of manufacturers. Today, however, a manufacturer’s customers may also make access to financial information a condition of doing business with them.

Requesting financial information by customers may not be surprising for companies the size of Ford Motor Co., but in today’s continued troubled economy, even smaller customers are beginning to ask for proof that a manufacturer is solvent and financially healthy.

You can’t blame the parties for requesting this information. After being decimated by sudden closures of manufacturers, many are still reeling. “There’s a lot of apprehension on both sides,” says Dan Shingler, manufacturing reporter with Crains Cleveland Business. “Everyone is worried about their supply chain. Manufacturers are asking ‘can the vendor fill my order?’ Suppliers are asking ‘when will they call and can I get paid?’”

These customers might face more complicated issues if they provide equipment to the manufacturer, such as a die, that could end up being held hostage in a bankruptcy, reorganization or sudden closure.

As the supply chain continues to restrict, the phenomenon of requiring financial information may become even more common. Some customers have even incorporated a request for the manufacturer’s financial statement history into their request for proposal process, and further ask for financial statements of existing manufacturers on an annual basis.

So how can you be prepared for this new manufacturing business trend? Here are three tips.

  1. Prepare your company’s financial statements in a timely manner.
  2. Be able to access your financial numbers quickly. This will allow the business to take advantage of timely opportunities.
  3. Use your company’s financial strength as a negotiating tool. By using your company’s superior financial strength to negotiate a better price, you can ask customers to pay a premium for your company’s financial stability.

Requests for financial information of manufacturers may be a new trend, but it appears unlikely to disappear, perhaps even long after the economy recovers. Look for this requirement to be become standard procedure for many of the customers your company works with.

Contact our Ohio manufacturing accountants

Do you have trouble preparing your company’s financial statements?  Can’t keep up with the paperwork and worried that vendors or clients will come asking to see it?  Our Ohio manufacturing accountants can help.  From taking over your financial statements to managing your entire accounting and bookkeeping function, our manufacturing accounting team can help with your paperwork so you can get back to the business of your business.  Click here to contact Rea & Associates.

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