Some small businesses that are short on cash will deliberately hold off on paying their bills until they're about to face consequences. It might seem like a good idea at the time because you can't pay what you don't have, right? But being a payment procrastinator can cause big problems for your business down the road. Here are six reasons to pay your bills in a timely fashion:
1. Gain a competitive advantage
Paying your bills on time is an easy way to keep your vendors and suppliers happy and motivated to go the extra mile for your business. Cultivating a happy, healthy relationship with them can be your competitive advantage. When you're in a crunch and need something turned around at the last minute, your vendor will go above and beyond to get the job done.
2. Pay early, save big
Sitting on your invoices might seem like a reasonable way to hold on to cash and earn extra interest in the process. But the reality is, you'll end up spending more on hefty late fees. Paying early, on the other hand, can get you discounts — and even more savings — if you negotiate with your suppliers. Aim to get anywhere from 10 to 15 percent off their services.
3. Save your good name
Your reputation is important, so don't be that company that can't or won't pay its vendors on time. Word will get around, and when it does, you'll be hard-pressed to find anyone to do business with you. If you're strapped for cash and must make a late payment, don't hide from your vendors and suppliers, and don't ignore those accounts receivable calls. Talk with your vendors right away about extending due dates on accounts payable, or try negotiating longer payment terms.
4. Keep your company creditworthy
Are you thinking of requesting credit? If so, why give anyone a reason to deny you? Potential creditors and lenders, including banks, suppliers and wholesalers, will likely request your business credit report before extending credit to you. When they see that you're not punctual with your payments, they might think twice about offering you credit, which means you'll have to pay cash upfront. Being prompt with your payments helps build your business credit history and increases your chances of qualifying for that loan.
5. Potential free marketing
Every person you come into contact with can talk up your business to family, friends and professional colleagues — or not. If they know that you're a professional, considerate business partner who pays your bills promptly, they will more readily sing your praises.
6. It's just good business
All businesses need cash to survive. And at the end of the day, small business owners just want to know they have the cash coming in to cover their bills. So don't make them wait for payment. With Deluxe eChecks, you can send payments electronically at the last possible second, even on the day they're due, and hold on to your cash longer in the process.