Cash Flow:
Late
Payments Can Hurt You as Well as Your Suppliers
Late
payments can produce serious financial problems. The effect on businesses
who suffer from high debtor days has been well documented. According to
official statistic it is directly linked to business failure. Less has
been written however about why paying invoices late can be disadvantageous
for the person who owes money.
This
article seeks to redress the balance.
Paying
your bills late can cause you economic problems. It can strain your
relationship with your suppliers who:
-Might
decide not to continue doing business with you; or
-Might
impose tough new payment terms on you- including compensation claims and
late payment fees.
The UK
government introduced the Late Payment of Commercial Debts Act in 1998 to
enable businesses to claim interest from companies who owed them money. As
a result, your suppliers are able to charge you extra for late payment
very easily.
In
addition to this, paying late can also damage your reputation which can
have serious consequences for your company.
Conversely you might find that if you commit to paying on time or even
early, that you are able to get a more favorable price from your suppliers
in return. This can help to reduce your costs and bolster your profit
margin.
Moreover, if you do find yourself in financial difficulties, your
suppliers are more likely to be accommodating if you have a track record
of paying promptly.
Ultimately, if you pay your suppliers on time you are going to have a much
better relationship with them than if they have to constantly chase you
for payment.
The
entire economy is based on the principle of prompt payment. After all if
you pay your suppliers late they will probably have to pay their suppliers
late and so on. Very quickly a spanner can be thrown in the wheel of
industry and everyone suffers as a result.
Victoria Selman may be contacted at :
http://www.onstop.co.uk/reduce-debtor-days.htm
