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. |
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