Paying Suppliers

It is better to have a limited number of suppliers that you know well and manage them. A model company treats everyone equally. Make sure that your suppliers get paid with the same promptness that you would want to be paid yourself. This practice ensures a good working relationship but also has hidden benefits. You might need to call in a favor at short notice (Can you double the CD run for next Friday?). With a good payment record they have every incentive to say, "Yes."

If you are going to be uncharacteristically late with a payment, the best policy is to let the supplier know. There isn't much they can do about it at this stage. Explain the cause so they can appreciate the problem and let them know when they will receive payment. Add on a couple of days' contingency; it's always best to be cautious with timescales. They'll appreciate the call and you won't be pestered by their accounts department.

Creditors typically get paid in the following order:

1. Secured creditors (for example, the tax man, bank loans)

2. Staff

3. Suppliers (on a strict first-in, first-out basis)

4. Directors

In most jurisdictions it is illegal for a director to receive payment if the firm has more debts than money.

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