Let’s get into another good habit every small-business professional needs to develop. In our last post, we tackled the importance of reconciling your accounts every month. Next, let’s get into a topic that everyone dreads: paying bills.
Every grown-up, business owner or civilian, knows paying bills on time is a smart move. Still, you’d be surprised how many people fail to make that important move—letting bills pile up, gathering dust and racking up late fees. Maybe they view bill-paying as a hassle, or they worry they’ll need the money for something more important. It also could be chalked up to laziness, or the thought they’ll eventually get paid somehow, one way or another.
While the act of writing a check or sending an e-payment can sting, neglecting the practice can wreak havoc on the health of your business. One missed bill can lead to costly late fees; letting a bill hang more than one month, or missing more than one bill, can cause bad blood with vendors. What’s worse, utilities and vendors can sock you with interest, hold back much-needed resources and turn you over to a collection agency, causing further damage to your reputation, and your credit rating.
A hit to your credit rating goes beyond suffering slight embarrassment. If that all-important rating declines, it becomes harder to negotiate credit terms with vendors. You’ll suffer a reduced or low credit-card limit. Additionally, you’ll likely find it difficult to land a personal mortgage or loan if you’re a single-member LLC.
One of my clients is a growing business struggling to raise its credit-card limit thanks to a poor payment history with its vendors. As a result, we’ve had to make multiple, significant payments to the card in question, just to stay head of the limit, and to prevent purchases from getting denied at the point of purchase. There’s a long road ahead, and while an end to the struggle is in sight, it would have been ideal to avoid the problem and pay those bills on time in the first place—unfortunately, there’s no such thing as a time machine.
Sometimes mistakes and troubles happen. What should you do in the unfortunate event that you simply can’t pay a bill on time. I’ll tell you what you shouldn’t do: Hide. The problem only gets worse if you try to avoid it altogether, letting the bill go unpaid and leaving calls from the vendor unanswered. Communicate directly and openly with the vendor, instead of burying your head in the sand. Work with them on creating a payment plan, so they know you’re earnest about making good on your debt.
Your vendors are businesses just like yours—and just like you, they want to be paid in a timely manner for the services and products they provide. Keeping on top of your bills is vital, because it enables your vendors to keep providing you with much-needed services and supplies. It also enables you to keep doing what you do best each day.
If you’re struggling with paying bills on time, or you don’t have a clear picture of exactly how much you owe your vendors, coming up with a process for accounts payable is important. Reach out to me at Daliah@MySmallBusinessPro.com and we can devise a plan.