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Cash today is better than the promise of more cash tomorrow. This was my motto as a bankruptcy litigator in Chicago, Illinois representing corporate debtors. I would get outstanding deals for my clients with that one line. In an economic downturn everyone wants the real deal – cash today. Tomorrow is a long way off and you might not get there.

In a Chapter 11 reorganization, I saw companies from the point of financial ruin and wondered how they had arrived there. While the reasons varied from inept management to cheaper labor in Asia, all the businesses had one thing in common – no one re-negotiated onerous contracts. This fact did not strike me, until as a business owner myself, I began helping executives improve their negotiation skills.

Companies rarely look at their contractual obligations early enough in an economic downturn, often missing opportunities to re-negotiate terms. It is as if the fear of tipping off the customer, vendor or supplier that there might be a cash flow problem outweighs the bottom line necessity to re-structure an agreement.

What I do know from negotiating with enraged creditors, customers and vendors is that they all wanted to know why they were the last to know. All too often, I heard complaints that they wished someone would have talked to them before getting a call from the bankruptcy attorney.

Re-negotiating the terms of some of your contracts can be risky. I urge you to carefully consider these three pieces of advice. Following them will give you a plan of action, easing the process for you.

Start now. Don’t wait until you are in crisis. 

Assign someone, preferably the CFO, to review all key contracts. Look for terms that could be re-negotiated like, charge backs, payment terms, interest or shipping and delivery provisions.  Once you’ve identified these terms, calculate the impact of making changes against the impact of not making them.

Request small, but meaningful changes.

Rather than asking for the one monumental change ask for smaller, more incremental changes. Payment cycles are a great example. Companies often agree to payment terms without calculating the impact on cash flow. When looking to shorten or lengthen the cycle, request 10 days, rather than a 30 or 45 day difference. In principle, it is much easier to agree to 10 days, because a small change like that may not need approval from upper management. Further, a small change will have less of an impact on the other company.

Create a proposal.

Don’t wing it. Because you are changing terms that impact your bottom line more than they impact the other company’s bottom line, you have more at stake if they say no. Thoughtfully create and pitch the proposal. For example, after you’ve stated the purpose for your call, acknowledge the impact that your request might have on them, while at the same time, explaining the necessity of the request.  By coupling concern for them with your needs, you balance the proposal. In effect, you are creating an opening for a discussion, rather than a 10 minute diatribe about what this request, if granted, will do to them.

It might appear temping to avoid approaching companies to re-negotiate contractual terms. While reducing discretionary spending and boosting sales are an option, re-negotiating contractual terms could get you greater long-term relief. But, there are more than tangible, financial benefits from the whole re-negotiation process.

Companies that engage in an open dialogue with their customers, vendors and suppliers often gain two intangible benefits; a deeper sense of trust and help when you really need it. Contrary to your belief that the other company will not work with you or trust you, companies that are treated with respect treat others with respect.

Don’t wait for a crises to contact valuable vendors, suppliers, and customers. The fact is, once a company is in a Chapter 11 re-organization, all the debtors contracts and obligations are re-negotiated. Rather than wait, enjoy the benefits of re-negotiating your contracts today. Start now by looking for small but significant changes.