When your total cash flows in and out of the business without any disruption, it means you have a healthy cash flow. Cash flow therefore is the first thing your potential business partners may look to see, because it gives them true picture of your financial situation. Above all, it unveils how well you have maintained the cash.
Any inconsistency in the cash flow cycle will not only make them wary, but can hurt your future business deals. Slow or late payment halts your cash flow cycle and prevents you from clearing the bills on time.
As a result, business begins to suffer, because three things happen when a corporation fails to pay its bills on time.
(i) Put You Under Debt
When your customers stop paying you, then the first option that may come to your mind to clear the stack of bills could be to get a loan. Certainly loan will help you maintain the positive image in front of the suppliers and keep things running smoothly.
But taking out loans with an intention to pay them back when your customer clears your dues is not a good idea.
It will further increase your debt as your customer has already declined to pay you. The best option for you is to use any savings or spare money rather than getting a loan. It’s always good to save some money when the business is running smoothly because you never know when things may go wrong.
(ii) Put You on the Negative List
Late payment has become such a graving issue today that businesses are becoming more and more cautious when it comes to doing trade. Suppliers do not hesitate to cut ties with businesses that are slow or late payers. As they are afraid that such businesses are more plausible to become insolvent.
Monitoring payment behavior therefore has become an essential practice for suppliers. So if you are a slow or late payer, it is highly likely that your suppliers won’t mind losing you rather than keeping you as a customer to disrupt their cash flow and business repute.
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(iii) Affect Your Credit Score and Spoil Business Opportunities
Late bill payment can severely hurt your credit score, as credit report always take in your account payment behavior when evaluating the credit score. You can also see a significant drop in your score, if you are frequently paid late because there will be a decline in your cash coming in.
Your credit score can decline further, if a CCJ is issued against you for not paying bills over a long period of time. But the worst thing of all is low credit score can spoil all the business opportunities that may come your way.
Businesses which conducts due diligence by the book will never be pleased if your payment behavior and credit score are poor.
Late payment is not just a dangerous credit habit, but it can badly hurt a business too, such as ignoring an account till it becomes insolvent or delinquent. Once an account becomes delinquent it means you have to dedicate extra time, money and effort to recover the lost monies.
However, this takes your focus away from your business, which will further increase your stress. To avoid such a situation, you must never do business with a company that is slow or late payer.
But it’s never easy to distinguish companies that are slow or late payers, so it’s best to acquire the services of a specialized collection agency such as Cedar Financial. So you can assign delinquent accounts to the agency instead of wasting your valuable time and money. It will significantly enhance your chances to recover the lost monies.