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5 Steps to Managing Angry Vendors

Okay, let’s say you’re managing a small business. You’ve got an established brand, a handful of employees, and you’ve had consistent growth each year. Then, last September, the economic crisis began to rear its ugly head and you started seeing its effects on your business. The money wasn’t rolling in like it once was and you’ve limped through the winter months hoping there’s light at the end of the tunnel. Up until last year you were able to pay down your accounts payable without too many problems. But it’s a different story now; vendors are beginning to get very anxious because they haven’t seen payment for months and you still owe them money. In fact, you’ve been hearing from them more and more. And it’s gotten so bad that you’re wondering when their frustration will turn to contempt. That’s when you’re fired.

So how do you avoid being fired by your vendors? How do you manage their frustration? Here are 5 steps to managing your vendors and the relationship with them. Remember, each require a diplomatic approach in order to ensure its effectiveness.

1. Acknowledge the Problem

The worst thing you can do is ignore your vendors’ complaints. Nothing will destroy a profitable relationship like arrogantly disregarding their frustration. If they call for money and complain, apologize. Tell them you recognize the problem. Tell them you’re sorry, especially if you’re responsible. Take responsibility.  Don’t make excuses and tell them you’re in it together. Everyone wants to be understood. So if you can actively empathize with their situation, you’ve got a better chance they will reciprocate.

It would be even better if you predicted the problem beforehand and cut your vendors off at the pass. The moment you see your cash flow situation creating a crisis in the future either correct it immediately or warn your vendors. Tell them what to expect and when it’s coming. They will pay more attention to your account and appreciate your honesty.

2. Maintain Total Transparency

Not only should you be upfront with vendors about your cash flow problem, but your conversations needs to be inclusive in nature. Tell them what’s happened. Tell them why cash flow is poor. There’s no use hiding it at this point. They already know you’ve got problems because you stopped making payment. If the vendor is third on the list to get paid, say it. If your customers are not paying you, say it. Be totally transparent so they can understand your situation better. After all, you’re not speaking to a robot; vendors are people, too. Just don’t make them feel like you’ve excluded them. Give them an opportunity to sympathize if  you want to make this an enduring and working relationship, a marriage of sorts.

3. Communicate Your Strategy

It’s one thing to say you’ve got a plan. It’s another to actually communicate it.

Once you’ve groveled and spilled your guts about the problem vendors will want to know what exactly you’re going to do about it. Do you have a payment schedule? No? Make one. You (and your vendors) need to know, based on current sales forecasts, how long it will take to pay down your accounts payable. Remember, it’s okay to tell a vendor when they will get paid, even if they have to wait until another one gets paid first. At least they know what to expect.

It could also be helpful if you included your vendors in the decision making process. Being a part of the solution can help them feel like they’re being treated fairly despite the problem you’ve imposed on them. Talk with them about their needs and wants. This will help you two identify a creative solution.

4. Negotiate a Creative Solution

There’s more than one way to skin a cat. You may owe a vendor $30,000 but that doesn’t necessarily mean they need 100% right now. Perhaps they will settle for 30%. Maybe 20%. Or maybe they’ll let you off today if you agree to a higher late fee later. Your credit terms might be adjusted. But that’s better than getting sued, isn’t it? Just get them something. Anything. Make them a plate of cookies if that’s what it takes. Sometimes all it takes to satisfy an angry vendor is to remind them you’re still alive and have their interests in mind.

4. Follow Through

Do what you say you’re going to do and when you say you’re going to do it. Enough said.

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