Many small businesses spend far too much time on debt collection rather than running their core business. Over the last 2-3 months I've noticed a lag in payment cycles. This lag is mainly from medium or large companies leading up to the end of year reporting season.
If you are in any sort of operation that uses small businesses as service providers or product suppliers it's well worth your while to pay your bills on time, or early, and completely ignore some too smart by half accountant's mantra of not paying your outstanding bills until the second reminder. Guess what? People are people and they will pay back and pay forward. One way or the other you will pay in the end, either in cash or your business reputation.
Here's why you should pay on time:
1. If you pay on time you will get much better service. I know with my customers, the one's who pay on time or early get the best service, day or night 365 days per year. These are A-Class clients. They pay on time or early, don't moan about the price, and as a result get excellent service and great value for money. They respect me, and I respect them. We both win. I also often send them referrals because I know they are honest and reputable.
2. If you don't pay on time you reputation is on the line. Small business owners love to gossip. They talk about any customers who pay late. And with the internet so freely available, your reputation can become terrible overnight. Remember too that your suppliers probably also deal with your competitors. With the rumor-mill running hot about your late payments, don't be surprised if an invoice that is three weeks late to be paid becomes industry gossip of your impending bankruptcy. This leads into
3. If you don't pay on time, you can end up paying a premium. The current cost of money is about 1.5% per month. If your payment reputation is bad, than expect to pay at least 10-15 % more than if it were good or unknown.
With existing suppliers, if you mess them around, they will either add 10% to their next quote, or refer you to a lower-class competitor - hoping to send them broke because you don't pay when due. In some cases your suppliers may even refuse to continue dealing with you unless it's cash on delivery.
4. If you pay on time your staff don't get hassled by debt collectors from your supplier's accounts departments. This is a big source of staff burn-out. If you pay on time your staff won't have to make up excuses for late payment and may actually start to enjoy their jobs.
In summary, if you want good service, good products, happier staff and ongoing loyalty, pay on time or before time and ignore your accountant's advice. What do you think? Why do you like early payment or not?
If you are in any sort of operation that uses small businesses as service providers or product suppliers it's well worth your while to pay your bills on time, or early, and completely ignore some too smart by half accountant's mantra of not paying your outstanding bills until the second reminder. Guess what? People are people and they will pay back and pay forward. One way or the other you will pay in the end, either in cash or your business reputation.
Here's why you should pay on time:
1. If you pay on time you will get much better service. I know with my customers, the one's who pay on time or early get the best service, day or night 365 days per year. These are A-Class clients. They pay on time or early, don't moan about the price, and as a result get excellent service and great value for money. They respect me, and I respect them. We both win. I also often send them referrals because I know they are honest and reputable.
2. If you don't pay on time you reputation is on the line. Small business owners love to gossip. They talk about any customers who pay late. And with the internet so freely available, your reputation can become terrible overnight. Remember too that your suppliers probably also deal with your competitors. With the rumor-mill running hot about your late payments, don't be surprised if an invoice that is three weeks late to be paid becomes industry gossip of your impending bankruptcy. This leads into
3. If you don't pay on time, you can end up paying a premium. The current cost of money is about 1.5% per month. If your payment reputation is bad, than expect to pay at least 10-15 % more than if it were good or unknown.
With existing suppliers, if you mess them around, they will either add 10% to their next quote, or refer you to a lower-class competitor - hoping to send them broke because you don't pay when due. In some cases your suppliers may even refuse to continue dealing with you unless it's cash on delivery.
4. If you pay on time your staff don't get hassled by debt collectors from your supplier's accounts departments. This is a big source of staff burn-out. If you pay on time your staff won't have to make up excuses for late payment and may actually start to enjoy their jobs.
In summary, if you want good service, good products, happier staff and ongoing loyalty, pay on time or before time and ignore your accountant's advice. What do you think? Why do you like early payment or not?
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