Sunday, April 15, 2012

4 Reasons a Business Should Pay Their Bills On Time

When a business is having good cash flow the subject of paying bills late never comes up. The time when business is slow and the money is just not there to pay bills, is the time when mistakes get made.

Why should a business pay their bills on time? Paying slow allows you to keep more of your money for your own use. Paying early or on time seems a loss of opportunity. I have known many business men who believe paying one month behind is a good way to keep their own money in their pocket for a little longer. This attitude is totally wrong and not only does damage to your businesses reputation but also the reputation of the business owner.

1. Reputation.
If the reputation of your business means anything to you there is no quicker way to malign it than by not paying your bills properly. Paying late or not at all gives you time to use the money for other things. It also damages your credibility as a trusted business owner. It damages your reputation in the community and gives your company a reputation of being a bad payer.

2. Saving Money.
Many vendors give a discount when paying your bills early. It may be even possible to negotiate an even deeper discount from a supplier on larger and future production needs. Establishing you good paying record shows the vendor you can be trusted. This relationship could come in handy for future discounts and patience when one month you can't pay your bill.

3. Building Necessary Goodwill.
Having the reputation of being a company who doesn't dodge it's bills, shows people you can be trusted. This trust translates into sales. No one will recommend a company who is a deadbeat when it comes to paying bills. Your future customers not only come from word of mouth from you customers, they also come from recommendations of the vendors you buy from.

Everyone you write a check to is part of your marketing team. From your reputation of paying your vendors, landlords, insurance brokers, and even the people that clean your office, they all can either recommend you to future customers or just shoot you down. Your reputation with these people is critical.

4. Your Credit Rating.
When you are a new business, a companies credit rating doesn't really exist yet. The company owners are using there own personal credit rating to stand up for the debt burden of the company. As the company grows and the need to expand calls for a larger sum of money to borrow, the credit rating and reputation of the company is vital. Where will the lender go to establish your ability to pay the loan back. Will you want the bank to talk to your vendors or will you be afraid of what they will tell your banker.

Your reputation and rank in the community is something that takes years to build but only an instance to destroy. It's an asset just as important as any other asset that your company owns.


These and many other great business ideas are in Bill Weirsma's book The Power of Professionalism: The Seven Mind-Sets that Drive Performance and Build Trust




2 comments:

  1. Tax liens may be the single most destructive collection action the government is able to place towards you, due to its lasting impact on your credit rating. Yet, losing your checking account, or noticing your salary decline every week may well be more financially damaging to start with. Obtain info about levies here: http://www.tax-defense-network-collection-action.com/collection-action/tax-defense-network-irs-tax-levy-american-taxpayers/

    ReplyDelete
    Replies
    1. The power to hurt your company by the government is unlimited. Always pay your taxes and payroll taxes even if you can't pay anybody else. You can always bancfupt from your creditors never the government.

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