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If Cash is Tight, in What Order Should You Pay Bills?

Provided by Visa, Content Partner for the SME Toolkit


Your goal is to pay your bills on time because by doing so, you encourage a sense of credit worthiness and trust that may enable you to survive periods of cash flow shortages. If you cannot pay on time, you should always keep the creditor, contractor, or vendor fully informed and explain when you plan to pay, and if necessary, the reasons for the problem. If you're headed into a deeper or more long-term financial morass, then you'll need to negotiate longer payment terms. And, you'll need to maintain and meet those extended payment terms if you want to retain trust.

  • Pay the government first.
    Pay the government first. The government can shut you down in fifteen minutes and they can go into your personal bank account.
  • Consider Short-Term Credit Card Financing.
    When you are pinned to the wall by accounts payable, credit cards may provide the necessary bridge-financing.
  • Pay to keep the doors open.
    After you pay the government, you should pay the bills that keep your business going—for example, if there is inventory you need, you're going to pay that vendor.
  • Pay some of your smaller bills.
    If you do get yourself in trouble, try and keep the pool of debtors as small as possible. So if possible, pay some of the smaller accounts. You don't want your mailman to stop coming or your utilities shutting off.
  • Don't rob Peter to pay Paul.
    If possible, avoid using money intended for one purpose to pay for something else – for example, avoid using money destined for taxes, to pay suppliers. When deciding who to pay, you don't want to accrue more debt or liability.
  • The squeaky wheel doesn't always get the grease.
    It's not necessarily a wise idea to move people to the top of your payment list just because they complain the most. You always need to be practical when assessing payments.
  • Don't avoid vendors.
    Don't hide. Always talk to your vendors. Take their calls and provide them with consistent facts.

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