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Pay your vendors

Why it matters to pay your vendors on time?

You know it: your objective must always be to retain your cash as long as possible without harming your relationships with your suppliers.

Paying too late is dangerous. Plus, it has a cost.

1. Putting future cash flow under pressure.

In future transactions, the supplier could require an immediate (or pre-payment), which will require you to find the necessary money and will impose an opportunity cost on your business that you could have avoided.

The opportunity cost consists of renouncing an interest-free loan for the time of the delay granted for payment.

2. Forcing more expensive alternative

The supplier may discontinue the business relationship with your organization, forcing you to spend time, and money, to find a replacement that may be more expensive or of lower quality.

3. Affecting your reputation.

A company that frequently exceeds payment terms with a supplier exposes itself to a weak trade credit rating, which can damage your reputation and complicate relations with your other suppliers.

4. Lowering your bargaining power.

The seller may also insert an ownership clause in the contract of sale, allowing him to remain the owner of the goods sold until you actually pay for them.

To achieve this objective, you must have a tool to ensure the efficient management of your supplier debts.