Pay on time

Sep 21, 2009

Probably no one warned you before you started your A/E/P or environmental consulting firm about the slipperiest of slippery slopes— one you don’t want to go down— that of not paying your bills on time. Not paying what you owe when you are supposed to is kind of like not having the time to do something now and instead trying to find time do it later. If you don’t have time to do it now, what makes you think you’ll have time later? And, if you don’t have the money to pay what you owe now, what makes you think you’ll have it later, either? I just had someone ask me to do something for their firm the other day when they still owe me money from 105 days ago. “Why in the world would I want to do more for them,” I asked myself? “Am I that desperate for cash? Do I think so poorly of myself that I should allow myself to be abused?” I think I’ll pass! In my younger days I simply would not work for anyone who owed me money more than 60 days old. I would threaten at 75 days. And, I would start legal proceedings to collect at 90. I was pretty much merciless, but I never held anyone to a higher standard than I had for myself. Yet, it seems today, because of “the economy,” that many think it is OK to abuse everyone they owe money to by being slow to pay. Not paying your bills on time is bad business. It will: Ruin your credit. Don’t think lenders don’t notice when your balance sheet shows more accounts payable than you should have for a firm your size. And, don’t think D&B creditworthiness reports aren’t used by people you want to do business with. Ruin your reputation. Don’t think people don’t talk when you don’t pay. Your subconsultants and suppliers talk to each other. If you are a “slow-pay” company, everyone knows it. And, they don’t like doing business with you (and won’t, the first chance they get to drop you). Plus, do you think your subs and suppliers do their “best” work for those who don’t pay their bills? Nope, not in my experience! Possibly destroy your company. If you don’t pay your bills now and cannot afford to later, that will lead to insolvency. And, if your reputation is destroyed, no one wants to work for or with you, and clients won’t use you. That can lead to bankruptcy. Some of you will say, “This all seems obvious. Of course we would pay— if we could. The only reason we are slow pay is we cannot afford to be any other way.” B.S.! There are nearly always other options, including one or more of the following: Don’t buy what you cannot afford in the first place. Seems simple but it is true! Raise more equity capital by selling stock. You may just be undercapitalized. Get over your fear of losing control. Borrow more from the bank. Interest is cheap these days. Improve your own cash flow by billing and collecting faster and dumping your own slow pay clients. This is always a good idea. Get more profitable through raising prices and/or cutting costs. This can help over time. Pay your bills on time. Don’t ruin your credit, your reputation, and your financial future by not doing so! Originally published 9/21/2009

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