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Resources: Where to Learn 
More About Business Debt & Payables

    

         

 

 

Visit this page often to see the latest news and tips on payables management.  Or, if you have questions about what you read here or have heard elsewhere, please contact us at once.                         

Slow to Pay Business Debts?  Why It DOES Matter!
           (from home page of web site)                          by Jim Hinckley       Virtually every business owner has done it at one time or another: delaying payment of an invoice or debt installment, often past the due date.  It's especially tempting to try it when your company's sales are down or an unexpected expense has suddenly landed on your doorstep.  But just as in other areas of life, it's easy for a "small bad habit" to quickly mushroom into a big problem.

And it's more likely to happen if the business owner believes there are little or no consequences to paying late.  Besides, with so many urgent priorities every day and an aggressive, optimistic mindset, what business owner has the time (or the inclination) to think about possible debt problems?

But the fact is, poor management of payables can put a company out of business.  Across the U.S. in 2005, about 544,800 firms with employees were forced to shut down, according to the U.S. Small Business Administration.  Even if it doesn't come to that for your business, the consequences of missing payment due dates can be serious:

- Credit Rating downgrades: Dun & Bradstreet is well known for the unique identifiers (D-U-N-S numbers) it has assigned to over 100-million companies worldwide.  These identifiers are used in its most popular product, DNBi, a database which subscribers can use to search out credit information on other companies.  In short, even if your business is very small, your payment history--good or bad--is being tracked and reported to a vast audience of other companies.

- Paying in Cash: If that DNBi subscriber doesn't like what's in your credit history, he or she is unlikely to sell to you on credit terms such as 30 or 60 days net.  You probably will have to pay cash, tying up a major chunk of your firm's working capital and weakening your cash flow.

- Early Payment Discounts: While many suppliers offer their clients price breaks for paying before the due date on an invoice, these discounts usually are not available to cash-only customers.

- Bank Loan Availability: Want to expand your business, or buy an important new piece of equipment or technology for it?  A loan from a commercial bank often can make it happen--but banks usually won't lend to firms with spotty payment histories.

While it's clear that these financial consequences of chronic slow payment can hurt your business, they are only part of the story.  An owner's focus and productivity--and those of his employees--can suffer greatly when debts and payables pile up, because of:

- Calls from creditors and collection agents: Some business owners even receive these calls at home, disturbing their families.

- Trying to juggle payments: In trying to satisfy an especially persistent creditor, an owner sometimes makes a promise in haste, without documenting it or notifying his staff adequately.  The confusion that results later, when the company tries to (or has to) make good on its promise, can fray staff nerves and derail other plans which the company may have had in the works for months.

- Even when it's not a creditor calling, just hearing the phone ring can trigger owner and staff worries that it might be a creditor call.  Staff morale/productivity surely will decline in this environment.

If your firm's late payments are on the rise, don't let the situation overtake you.  Instead,
talk with the debt settlement experts at Performance Source Inc to find out how they can help you succeed in managing your business debt challenge.  They understand your need for confidentiality, and will give you an honest assessment of your firm's debt situation. Contact them today--because yes, it DOES matter to your company's future.

No doubt about it, business debt and settlement of it are large, complex topics.  So from time to time we will post articles on this Resources page to aid you, the business owner or manager, in understanding what choices, help or opportunities are available in debt and payables management..