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Slow
to Pay Business Debts? Why It DOES Matter!
(from
home page of web site)
by Jim Hinckley
Virtually
every business owner has done it at one time or
another: delaying payment of an invoice or debt
installment, often past the due date. It's
especially tempting to try it when your company's
sales are down or an unexpected expense has suddenly
landed on your doorstep. But just as in other
areas of life, it's easy for a "small bad
habit" to quickly mushroom into a big problem.
And it's more likely to happen if the business owner
believes there are little or no consequences to
paying late. Besides, with so many urgent
priorities every day and an aggressive, optimistic
mindset, what business owner has the time (or the
inclination) to think about possible debt problems?
But the fact is, poor management of payables can put
a company out of business. Across the U.S. in
2005, about 544,800 firms with employees were forced
to shut down, according to the U.S. Small Business
Administration. Even if it doesn't come to
that for your business, the consequences of missing
payment due dates can be serious:
- Credit Rating downgrades: Dun &
Bradstreet is well known for the unique identifiers
(D-U-N-S numbers) it has assigned to over
100-million companies worldwide. These
identifiers are used in its most popular product,
DNBi, a database which subscribers can use to search
out credit information on other companies. In
short, even if your business is very small, your
payment history--good or bad--is being tracked and
reported to a vast audience of other companies.
- Paying in Cash: If that DNBi subscriber
doesn't like what's in your credit history, he or
she is unlikely to sell to you on credit terms such
as 30 or 60 days net. You probably will have
to pay cash, tying up a major chunk of your firm's
working capital and weakening your cash flow.
- Early Payment Discounts: While many
suppliers offer their clients price breaks for
paying before the due date on an invoice, these
discounts usually are not available to cash-only
customers.
- Bank Loan Availability: Want to expand your
business, or buy an important new piece of equipment
or technology for it? A loan from a commercial
bank often can make it happen--but banks usually
won't lend to firms with spotty payment histories.
While it's clear that these financial consequences
of chronic slow payment can hurt your business, they
are only part of the story. An owner's focus
and productivity--and those of his employees--can
suffer greatly when debts and payables pile up,
because of:
- Calls from creditors and collection agents: Some
business owners even receive these calls at home,
disturbing their families.
- Trying to juggle payments: In trying to satisfy an
especially persistent creditor, an owner sometimes
makes a promise in haste, without documenting it or
notifying his staff adequately. The confusion
that results later, when the company tries to (or
has to) make good on its promise, can fray staff
nerves and derail other plans which the company may
have had in the works for months.
- Even when it's not a creditor calling, just
hearing the phone ring can trigger owner and staff
worries that it might be a creditor call.
Staff morale/productivity surely will decline in
this environment.
If your firm's late payments are on the rise,
don't let the situation overtake you. Instead,
talk with the debt
settlement experts at Performance Source Inc
to
find out how they can help you succeed in managing
your business debt challenge. They understand
your need for confidentiality, and will give you an
honest assessment of your firm's debt situation. Contact
them today--because yes, it DOES matter to your
company's future.
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