By Evan Vitale
Bills. Bills. Bills. Everyone and every business has invoices and bills they need to pay. It’s how our economy works.
In terms of a business, the money you owe on invoices and bills is known as Accounts Payable. It’s what a business owe to suppliers and creditors and it’s vital to a business’ lifeline that invoices are paid on time, every time. A late payment is not only frowned upon, but your company can incur late charges and extra fees – let alone a mark on your company’s credit score.
Consider these tactics and tips when it comes to your company’s accounts payables:
- Always know when an invoice is due. A due date doesn’t mean that’s the date you mail the check. Instead, it’s the date when payment should be received.
- Take advance of special payment terms. For example, sometimes a company will offer “2% Net 10” on every invoice. This means they are offering you a 2% discount on your invoice, if payment is received in 10 days. On a $1,000 invoice, that’s a savings of $20. Although that might not seem like much money, consider that over a 12-month period, you could save $240!
- If you find you’re unable to pay an invoice on time, the best thing to do is to call your vendor and let them know. Hiding the invoice at the bottom of the pile won’t make the problem go away. Make the call. Offer a partial payment. Let them know when they can expect payment, etc.
- Consider using a company credit card. It’s understandable that sometimes businesses can’t pay vendors until they are paid by customers. However, to keep your vendors happy (and keep as much cash on hand while you are waiting on client payments), consider paying some invoices with a company credit card. That way, invoices are paid on time and your existing cash stays in the bank. Then, as clients payments are received and deposited, you can make timely credit card payments and avoid interest and penalties.
Paying invoices and receiving payments is the cycle of a business. Money in. Money out. If you need more advice on how to better handle Accounts Payable, talk to your accountant and, perhaps to your attorney or banker. They’ll give you excellent advice on how to keep vendors happy with timely payments and how to improve your company’s cash flow.
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Evan Vitale writes and publishes a sports blog at http://evanvitalesports.com