Why holding on to your bills is losing you money and damaging your reputation.
The last year has seen massive savings, more hidden mattress money and an aversion to paying bills, all on a global level. The economic uncertainty created by the global pandemic has seen a rise in conservative finances for individuals and businesses. Yet holding onto your money by not paying bills and expenses on time can and will cost you more in the long run. Aside from saving you money, control of your financial life can reduce stress, boost your credit score and maintain your reputation within your business community. Holding onto cash can certainly be a part of your financial plan for unexpected expenses and emergencies but to stash it under the bed or use it to head for the hills when things get messy are not good alternatives. All of your dealings leave financial tracks and you don’t want to appear in the Dun & Bradstreet credit report detailing your reticence in paying your bills. Creditors and competitors alike can purchase such reports and use them to their advantage. No business wants to end up paying cash in advance for products and services because their bad credit score has become common knowledge.
It’s important to note the three main reasons for holding onto cash and understanding where you fit in and how you can change your mo tives. Every business needs to keep cash to meet daily expenses such as paying employees, suppliers and overheads. Having a good cash flow management plan can make this transaction motive, manageable and simple. If your company doesn’t pay its bills because it has a speculative motive that maybe they can use the money to invest in something with a quick profit turnaround, consider the low return on any gambling opportunity. The precautionary motive is one we have already covered via the rise of pandemic anxiety. This can become a psychological motive and be very difficult to overcome.
There are compelling reasons to pay your bills on time and not hide it in a shoebox. All of the reasons, previously stated like reputational loss and bad credit ratings, have another incentive to pay for products and services when required. Inflation, the upward movement of all of those products and services, can diminish the savings you think you make by not paying your bills. As prices go up, your savings go down, as indicated by the quarterly CPI (consumer price index) report. I don’t remember when milk was 20c but that’s because of the effects of inflation. $100 hidden under the bed with an average inflation rate of 2%, only buys you $98 in a year and less over time. Finally, think about the businesses you are affecting by holding onto your bills and what it means to be a good financial citizen, appreciated by all you deal with?