|Posted by dwest on August 16, 2010 at 4:10 PM|
It is important to manage cash in your company. There have been many articles telling us how to do this during this recession. Remember, it is not always good to stretch your payables too far with days outstanding of your invoices (bill paying).
This is good advice for both small and large companies. Your suppliers search for companies they may create continuing partnerships with. A simple question of what is the average days payable aging of a business will tell people three things how business is performed:
Large corporations seem to allow this to happen even more than smaller companies. Realization is that there may be many missed revenue opportunities simply because a business does not pay their bills (invoices) sooner than expected (when they are due). Do you realize suppliers may avoid working with a client that pays their invoice after the terms of the invoice are due? Or, they may set priorities of completing other projects from other businesses first; if they know a specific company has a history of not paying on time. Reasons may not be a lack of cash, they may not be organized.
New businesses which start out want to hold on to their cash. This is natural tendency to do. Reality – this is the time you need to establish your credit. If there should ever be a period that you may need to juggle your cash flow (which does happen with new or small businesses) – suppliers will be more understanding if they have received on-time payments from you.
Managing your cash flow is essential. To hold onto your cash and not pay your bills may have negative results for businesses – large and small. This is one area where other businesses may simply choose NOT to work with you - because you stretch your payments to 45 days.
All businesses, even large corporations want to increase their client base and revenues. Perhaps other businesses do not want to work with you simply because they have not been paid on-time?
Remember to ask how often bills are paid when negotiating agreements - it may be a deal breaker.