Screwed by the Economy

Here's a true story that illustrates how today's financial climate can affect any small business. Even yours.

A business owner I know owes his primary vendor about $3,000. He wants to stay on good terms with this vendor, but cash is tight. He's got receivables over $6,000, but people are slow to pay. So he makes use of one of those nasty little checks your credit card company sends you from time to time. You know the ones - high interest, last of the balance to get paid off. He writes the check knowing he can pay it off as soon as he collects on his outstanding A/R.

Fast forward two weeks. A letter arrives from American Express saying the check he wrote his vendor was not honored. Not because he didn't have the available credit. Not because his payment history was poor. Not even because of a bad credit score. No, it was not honored because "other customers making similar purchases have a poor repayment history." The business owner quickly contacts his vendor and writes a personal check to cover the one AMEX chose not to honor. But the damage is done.

The vendor has now blacklisted the business owner for writing a bad check. Not only that, the vendor assessed a bad check charge. The vendor also bounced a couple of checks to their suppliers and an employee's paycheck bounced. So now the vendor has issues with suppliers and additional costs incurred for the bounced checks. The vendor's employee bounces checks and perhaps is one of the folks on the original business man's list of people who don't seem to be paying in a timeley manner.

And the cycle continues. I just want to know when the government is going to contact me about buying MY bad debt. What do you think?