If a customer is also a vendor and not paying their invoice, do you think it is good practice to pay them with the open A/R dollar amount?

I worked for a small metal shop with annual sales revenue of 6mm, and the company hit a very slow sales window for a four month period and this put the company behind on paying of the vendors. The A/P was almost 90% over 45 days and the vendors were threatening to cut us off on a daily basis. The Accounting Manager was forced to swap the open A/R balances to pay down the open vendor invoices. This was done on several accounts, and was used as a last option to keep day to day business and operations running.

The interviewer is looking to see how you troubleshoot, and where you stand when it comes to handling cross-over accounts that are in arrears. It's not a common practice to do this, and one that most Controllers dislike. Most schools will agree when you are taking your A/R training, that this is not the best practice; however, a business must do what they have to, to receive payment. Discuss your thoughts on this practice.

"I have found that in small to mid-sized businesses, where the customer is also a vendor, the businesses will swap A/R and A/P amounts to settle accounts. I worked for a small metal shop with annual sales revenue of 6M, and the company hit a very slow sales window for four months. This dip in business put the company behind on paying off the vendors. The A/P was almost 90% over 45 days, and the vendors were threatening to cut us off on a daily basis. The Accounting Manager was forced to swap the open A/R balances to pay down the open vendor invoices. This swap was done on several accounts, and was used as a last option to keep day to day business and operations running."