CFO Services | Should Entrepreneurs Pay Bills on Time
Often, business owners think a great strategy to help save money says CFO services. Is to pay their bills one or two months later. So that they can maintain positive cash flow in their business.
Unfortunately, not only is this not an effective business strategy. But entrepreneurs who do this, but their business in jeopardy.
The reason why, is because once a business owner stops paying their bills on time. They put themselves in a position. Of not understanding what their margins are.
And when they do not understand what their margins are, they are not going to know how to increase the revenue. Or understand how many customers they need to walk through their door in order to break even.
Therefore, CFO services says that one of the first things that business owners need to know. Is that they have to pay their bills on time. And they can get into this habit early.
By doing this early on in their business. Before they grow their organization. They should start to learn their finances when they are small. And get into the habit of putting their bills on time.
Because when they understand their finances when they are small. And get into the habit of paying their bills. When they grow, they will first of all be able to understand what they need to do if they are not able to pay all of their bills.
But also, they will be able to understand their finances when they are larger, and will already be in the habit. Of paying their bills on time. That will be very helpful when they are large company.
And despite the fact that most entrepreneurs think they need to grow their business. As large as they can, as fast as they can. To grow their business without first understanding their finances. Is very dangerous.
The next thing that business owners should keep in mind. Is when they are not able to pay their bills on time. They either need to increase their revenue, or decrease their expenses.
Or both in order to ensure that not only are they paying bills. But that they are running a business that is going to allow them to profit.
And when business owners are unable to pay their bills, they may want to look into whether they have unsustainable overhead or not. Although many business owners do not know what unsustainable overhead means.
All of the bills that an entrepreneur has to pay says CFO services. Before they start selling any products or services in their business. Our an entrepreneurs overhead.
Most typically, overhead includes the rent of the office space, the utilities of the office space, and other bills such as phones and Internet. But also can include things like the office supplies, bank charges.
And one of the payments that an entrepreneur makes. That is often overlooked as a part of the overhand, is there administrative staff’s salary. This needs to be included as part of the overhead expenses that an entrepreneur has in their business.
And by understanding their overhead, entrepreneurs can learn what expenses to cut. In order to impact their bottom line the most. So that they can perhaps avoid not paying their bills late.
One of the most important things that entrepreneurs should learn how to do says CFO services. Is understand what it means when they are not able to pay their bills on time.
Typically, it either means that they are not generating enough revenue in their business. And they need to figure out if that is the case, and why. If they are not attracting enough customers.
Or if they are not covering their expenses with their pricing. In figuring that out can help ensure that for every product or service they sell. They are covering their cost and generating money.
So that they can figure out how many customers they need to break even, and grow their revenue. But they also need to figure out if they need to minimize their overhead expenses.
And often, CFO services says the solution is a bit of both. And to learn how to do this when the business is small. Is extremely important, before an entrepreneur grows. And this problem simply becomes worse.
If entrepreneurs do not figure out how to overcome these challenges. When they are larger company, they can be almost impossible to dig themselves out of that large role that they have created.
Which would cause them to be in a position worse off than brand-new entrepreneurs are in. By starting a business with little to no money. Whereas these business owners have a massive pile of debt instead.
And once an entrepreneur gets into the habit of paying their bills late. Instead of generating more revenue or cutting expenses. They will lose money every single month says CFO services.
And when they have even less money, they will stop paying other bills. Such as taxes to Canada revenue agency. Which can put them in an even worse position than they have ever been in.
Because when they stop paying taxes, the penalties and late fees that they will be issued by Canada revenue agency. Can be impossible to pay. And when an entrepreneur does not pay the penalties issued to them by Canada revenue agency.
CRA can either go directly into their bank account and take the money out of it that they are owed. Or simply freeze the bank account, so that it causes an entrepreneur to not be able to operate their business anymore.
This can destroy business slowly says CFO services. Is why entrepreneurs should always avoid this strategy. And pay their bills on time, and if they cannot. Figure what they need to do to generate more revenue and minimize expenses.
The sooner an entrepreneur can remember this. And learn how to do this in their own business. The sooner that they are going to be able to grow their business. And avoid certain disasters that may come from running out of money in their business.