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E-Myth – “Why most small businesses don’t work & what to do about it”

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Outsourced CFO | Why Should Business Owners Pay Bills On Time

The reason why it is important for business owners to pay their bills on time has a lot more to do with then just being a good business practice says outsourced CFO. And while it is a very good business practice, there are many other reasons why this is an important practice to get into. And the earlier business owners do this, the better. In fact, business owners often believe that delaying or avoiding paying bills as a necessary part of business building, but that is not only not true, but is a dangerous practice to get into.

The first reason why business owners should get into the habit of paying their bills regularly and on time, is so that they understand if they are making enough money in their business to pay all of their bills every month. If they regularly have a shortfall, outsourced CFO says that this should be a message to business owners that they need to figure out how to increase revenue, increase margins, or cut expenses. If they are not paying bills regularly or on time, that a business owner does not have an indication that they are running out of money every month.

When a business owner runs out of money every month, the problem that happens is every month, they get farther and further behind in their bills. Ultimately, it will only take a few months of this before a business owner has dug themselves into a pit of debt that is difficult or hard to pull themselves out of. In fact, 50% of all Canadian businesses will goad business in the first five years, and 29% of those businesses will say that running out of money was the reason why they failed. Business owners who are consistently not paying their bills on time are putting themselves into this position, and affecting their ability to be successful.

The next thing that business owners should keep in mind according to outsourced CFO is if they pay their bills late on a consistent basis, their team is going to see that they avoid their obligations. This is going to create a company culture that will affect the behaviour of all of their staff. By showing their team that they do not meet their obligations, causes their team to not meet their obligations, and a business owner will see that they will start to show up late, leave early and missed deadlines for example. Therefore, business owners need to understand that sitting company culture starts with them leading by example first.

Paying bills on time is very important, and all business owners should get into this habit, for a variety of reasons. Not just because it will help them ensure that they have enough money to operate their business. But so that they can lead their team by example, and ensure that everybody is putting their best effort in to helping the business succeed.

Outsourced CFO | Why Should Business Owners Pay Bills On Time

Business owners who get into the habit of not paying their bills on time, or regularly can be putting their business at risk says outsourced CFO. The reason what so important, is so that entrepreneurs can see if they are making enough money in their business to meet all of their financial obligations. However, some business owners believe that their financial problems will disappear if they can just scale their business up. By having more jobs and more customers, they will be able to avoid running into financial difficulties. Unfortunately this does not work. When business owners do not have a financially viable business, when they scale that up, they just have a larger business that is not financially viable.

When entrepreneurs force themselves to pay all of their bills on time, it allows them to see if they need to change anything in their business to allow themselves to have more money. This might mean having to increase the price of their products and services, so that they can make more money. Or it might mean that an entrepreneur needs to increase their advertising, or they may have to minimize their overhead. Outsourced CFO says that some overhead is so large, that is owners could literally double sales and it would not a good difference. Therefore, business owners who get into the habit of paying all of their bills on time will be able to see very easily if their overhead is unmanageable.

When business owners looking at their overhead, they will see that there is a great deal of expenses such as utility bills, phone and Internet bills, office supplies and bank charges that do not add up to a whole lot. However, there two things that businesses should look at, because they represent the vast majority of their overhead expenses. These things are administrative staff as well as rent. Business owners may have a difficult time trying to minimize the rent, typically because they either are locked into a lease, they have a mortgage. That leaves administrative staff as one of the only things associate with overhead that will add up to very much, or is something that they can control. For example, if a business owner is able to eliminate all of their other overhead expenses such as the bills, the office supplies and bank charges, that might make less than 1% difference to their entire bottom line. But laying off one administrative staff can make a 15 to 20% difference on their bottom line.

And while business owners may hesitate to want to lay off a staff member, outsourced CFO says that business owners may have to make the difficult decisions to ensure that not only the long Jody of their business, but the overall well-being of their entire staff. By paying their bills on time every month, entrepreneurs can see this in their business, and be able to make decisions that they need to. Whether they have to increase margins, increase revenue, or cut expenses all of these decisions will be made much easier if entrepreneurs pay all of their bills on time.