CFO Services | Paying Bills Late in Business
So many businesses think that a viable financial strategy in business says CFO services. Is to not pay their bills on time. So that they have an extra cushion of money, to increase their cash flow.
However, this is not only a terrible idea. Because it will cause an entrepreneur to develop a poor reputation. That they are not going to pay their suppliers on time.
But it is also a terrible idea. Simply because people who are not paying their bills on time. Do not understand their margins. And when they do not know their margins, they do not know how much money they are making. Or how many customers they need to attract to grow their revenue.
Therefore, business owners should avoid this strategy. And instead, if they run into a problem. Of not being able to pay all of their bills one month. They need to learn what they should look at, in order to ensure that they can pay all of their bills says CFO services.
The first thing that they should look at our overhead expenses. Because often, when business owners get behind on their bills. It is because they have unsustainable overhead. But once they fall behind in their payments, it may be very difficult for an entrepreneur to understand this or fix it.
And since overhead refers to all of the expenses that they must pay. Just to open the doors to their business before they sell products or services. The types of expenses they will have that is considered overhead. Include the rent of their office space, utilities, and bills such as phone and Internet.
But it can also include things like their office supplies such as pens and paper, bank charges, and even administrative staff’s wages. When these costs are unsustainable. A business owner needs to know what expenses to minimize.
Because often, CFO services says that entrepreneurs are usually trying to minimize expenses like phone bills or bank charges. Even though those are going to have the least impact on their bottom line. While rent and administrative staff wages.
Are going to be the expenses that have the greatest impact on their bottom line. And while it may be very difficult to minimize their rent. Unless they renegotiate their contracts, which is not always possible.
The next thing would be decreasing the hours of their administrative staff. Or laying one of them off entirely. Even though that might feel like a bad thing to do says CFO services. Because they do not want to let their team down. Doing this is more ethical in the long run.
Because if they have unsustainable overhead. They are going to continue running into financial problems. Which will eventually cause them to go out of business. And then nobody will have a job. So letting one person go is going to help save the rest of the team.
Therefore, when entrepreneurs understand that delaying paying their bills is not a viable business strategy. But what they can do when they run into some financial difficulties. Can help them be more responsive, to help them not only avoid problems. But help them proactively grow their business as well.
There are many things for entrepreneurs to keep in mind when they open the doors to their business says CFO services. And one of those things is that half of all entrepreneurs in Canada fail within five years.
And by keeping this in mind, entrepreneurs can learn what they need to do. In order to avoid the problems that have caused other entrepreneurs to not succeed. Starting with understanding the reasons why those entrepreneurs who fail struggled so much.
29% of all entrepreneurs who failed, itches a third of them. Said that the problem they faced was that they ran out of money. Making this an extremely common reason for failure. That with the right information, entrepreneurs should be able to overcome.
However, when business owners run into some financial difficulties. And they are not able to pay all of their bills on time. They are not responsive enough. To know what they have to do to avoid continuing this problem. Such as increasing their revenue, and minimizing their expenses.
So that they can have more money, to allow them to pay their bills on time. Instead, CFO services says too many entrepreneurs simply start paying all of their bills late. Hoping that eventually, they will have more money commit to their business. That will help them pay their bills on time.
Unfortunately says CFO services. Once an entrepreneur is behind in their payments. They often do not understand what their margins are anymore. And they do not know how much money they are making, which can make it difficult to increase their revenue. To help them start paying their bills on time again.
Therefore, business owners who start paying their bills late. Often end up making the situation worse as their debts pile up. And once their debts have piled up enough. There often in a worse position, then brand-new entrepreneurs.
Therefore, business owners need to realize that paying their bills late is a strategy. That is only going to and up with them in a situation. Where they may not be able to overcome these obstacles. And is a slow way to run out of money and fail in business.
And if an entrepreneur continues to not pay bills. As a method of having money. What will eventually happen, is they will continue to when out of money, and will have to find more things to avoid paying. That can make the situation even worse.
Such as avoiding paying Canada revenue agency the taxes that they owe them, and avoiding paying payroll remittances. Because the penalties that they will face if they stop paying these will be so significant. That entrepreneurs who stop paying taxes. Typically do not recover from this problem.
The sooner entrepreneurs can learn how to pay their bills on time. And learn what they need to do in business. In order to increase their revenue so that they can pay their bills on time. Will help them run a successful business, even as they grow.