Week 2: Be a good payer
Welcome to the 2nd blog in this series. How many times have you been told by a customer “the cheque is in the post”. It is a common phrase and it often appears that the majority of people who use this phrase all have a special postal service which can take weeks from collection to delivery, sometimes not delivering at all! In fact how surprised are we when the cheque actually does arrive in the post the next day?
Some companies seem to want to hold on to their money for as long as possible regardless of what damage it does to their suppliers, their own reputation or the services they receive.
Let’s look at what the real cost of deferring payment can be:
- Your time
As a manager deflecting calls, promising “the cheque is in the post” and other excuses all take time, yours, your supplier and anyone who fields your calls for you. This all adds to your costs and your suppliers. Don’t under estimate the cost to your business of this additional time.
- Reputational risk
Your suppliers will almost certainly speak to each other within their business community and who they have to chase for money may be one of the things they discuss. Do you really want the reputation of a company that is hard to get payment from?
- Service
Repeated late payers may find they are at the back of the queue when it comes to price increases. As an example in the event of a shortage in the supply chain, which customers are likely to be informed of an upcoming shortage or which suppliers choose to cut back in a shortage, those who pay promptly or those who they have to chase?
- Damage to your suppliers’ Cash flow
Many suppliers suffer with their own cash flow issues and in extreme cases late payment from customers can push them out of business.
It is possible that some suppliers will refuse to deal with habitual late payers or simply add a premium to the price to cover the additional cost of providing an interest free loan and the time involved in a protracted collection process.
In summary a customer with an excellent record for paying on time (or even a little ahead of time) will often get superior service, better prices and reputation for being straight forward and easy to deal with.
All of the above adds up to a real reason to consider paying just a little before due date and enhancing your reputation and possibly reducing your costs.
Image 
All rights reserved by Sevans 1988