Why paying your bills late is costing you more than you think.
“Cash is king”, has long been the rallying cry for small businesses but late payments have killed the king and continues to erode growth opportunities and add layers of costs for business owners. Dun & Bradstreet tells us over $19 billion is locked away from Australian businesses every year due to late payments. This means $19 Billion of cash sits on the wrong balance sheet and is owed to cash strapped vendors. Add to this, AISB reports Australians ranked in the top 3 worst offenders for late payments, in the world.
Over 90% of SME failure is due to poor cash flow with one of the main reasons being 62% of business invoices are paid late. Australian businesses it seems, have chosen delaying supplier payments as a way to preserve cash, turning suppliers into bankers. The facts are, every bill paid late, damages a business’ reputation, increases liability, has an opportunity cost and can legally attract late payment fees. There is also the emotional toll of a stressed supplier chasing invoices.
Suppliers will inevitably ‘price in’ the cost of delay and customers lose the right for any preferential treatment in time of need. A late payment increases the operating cost of the supplier (interest cost, debt collection cost, etc) which is ultimately passed down to the late paying customer.
Financially, late payers are also losing out on profitability by forgoing the ability to save through early payment discounts to the tune of 2-8%. Paying you bills on-time (or earlier with discounts) is good for business and good for your reputation. You will always have to pay your bills in the end so why risk losing a good reputation over a few days or weeks and forgo the opportunity to ask for early payment discounts?
Paying your bills on time (or earlier) is easy with the right choice of software and apps. The combination of softwares should include the ability to add value by automating the offering of early payment discounts to suppliers which can add value to your profit line and contribute to your reputation bank. Cutting down processes by automating them enables every bill to be efficiently allocated to the preferred payment method, scheduled to be paid on time and only exceptions need to be managed..
Who doesn’t want to create a reservoir of goodwill along with earning a reputation that sets you apart from your peers? Paying on time (or earlier) makes sense.