What are the payment priorities in your business?
This will depend on the type of business you run but in general if cash flow is tight you are going to have to manage it and prioritise payments.
• Payroll – Not paying your employees on time should be avoided at all costs. You might be able to renegotiate contract terms with some staff members but in general, you do not want anything that is going to affect staff morale!
• Suppliers and business partners – don’t lose goodwill with your suppliers, you can negotiate terms or ask for longer to pay or agree payments plan’s but make sure this is well in advance of any due payments.
• Aged Payables and Bills – missed payments and age payables (over 60 days) can have the potential to affect your credit rating.
• Insurance – Don’t miss insurance payments otherwise you won’t be covered, especially professional indemnity and public liability cover!
• Credit Cards – late payments and interest can soon mount up.
Good accounting is vital, so you know what is due to be paid and when! Decide on your payment priorities and plan accordingly.
In general, businesses don’t fail due to lack of sales, they fail due to poor cash flow management!
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