[David Strom's Web Informant] 8 February 2010: Strom's Simple Stimulus Solution

[David Strom]

Web Informant 8 February 2010: Strom's Simple Stimulus Solution

Usually, I write about interesting trends and technologies but today
my focus should have a lot wider appeal. I have a solution for our
economic woes, and it doesn't involve big taxpayer bailouts of
fatcats, misguided tax cuts, or any really big effort to overhaul our
financial systems requiring legislation too thick to comprehend by
your average Congressperson. It is something that can appeal to
Democrats and Republicans, Tea Partiers and Tree Huggers alike.

In fact, it is so simple that you can get it in a sound bite. Here goes:

Let's ask all businesses to get rid of their payables, and go to net
15 days. Get rid of lengthy payment cycles, and we can stimulate the
economy in a matter of a month or two.

When was the last time your company paid their bills quickly? I am
thinking somewhere around 2007. We have turned our creditors into
lending institutions, unregulated, unwilling and unwary ones at that.

One of the first things that In-Bev did when they took over
Anheuser-Busch here in St. Louis back in 2008 was to institute 120-day
payment cycles on all bills. They basically turned themselves into the
In-Bev Bank, keeping their suppliers' cash for an extra quarter. It
was a neat accounting trick, but it was a dirty one. In one move, they
took millions of dollars out of the economy and put it in their new
"bank." That money has disappeared forever. Until now.

By accelerating payment, we move money back into the economy at a time
when it is needed. We eliminate our receivables and we can spend more
to expand our businesses, or at least make payroll, or build more
widgets and deliver more services.

We don't have to rejigger the already too-complex tax code. We don't
need lots of lobbyists running around telling us what to think. There
are no Senators from Midwestern states to hold us hostage for their
pet programs or businesses. We don't need new regulations to prohibit
credit swaps and new securities that ten people on Wall Street can
only understand. We just need the force of will and determination to
make us all a great place to do business once again.

As someone who runs a small business, it hit me that I have no
payables to speak of. Of course, receivables are another matter
entirely and in the past year I have seen the average payment times
get longer and longer, as my clients hold on to their cash. I pay my
bills promptly, not that I have much choice when the rent is due or my
cable bill arrives. My biggest payable each month for my business is
my credit card, and I choose to pay it off when it arrives. Call me a
dinosaur, but that's the way I want to do business. I just wish others
would follow.

Call this my hopey-changey kind of stimulus. It might just work.