Paying Bills Early Vs Holding Till Last Minute

Mike Finley

That's all well and good if you're Walmart and you are F&&king over somebody like Exxon.

However, we are small businesses and our subs are usually smaller businesses.

There are different rules that apply here... maybe one of them is honor and ethics and a good dose of fair play goes a long way instead of trying to screw your neighbor in the race for an extra 1/2% of something?

Also it should be more about profit then float. We all need to keep our eye on the prize and not be distracted by nonsense. I guarantee you anybody that does that will come out far ahead in the long run vs some penny pinching douche who made an extra 1/2% off the backs of his subs and suppliers just and due bills.

bob_cntrctr

Agreed. It's a great story, and it's worth it if you have a $200-million float in the bank. On $20k, you're gonna do better getting a 5% discount for being a good payor.

PMbrian

If you are getting up to 10% for paying on time or net 30 whatever the terms are, you would be crazy to pass that up. I haven’t heard of 10% usually 3% discounts are common.

Take the 10%, you won’t make that in interest by holding payments.

Mike Finley

It's traditionally :

"10 net 2"

Meaning pay within 10 days, deduct 2%.

But what you are trying to get across is sound.

pcplumber

When you open an account at a supply house you may get a 2% discount for paying early, but you are probably paying 5% to 10% more than you have to. This is because (at least for plumbers) when it gets close to the end the month the supply houses are notorious for inflating your bill by more than 10%.

This is how it works. We used to buy up to 40,000 feet of pipe every month. Suppose at the beginning of the month the price for the pipe was 25 cents a foot. When we got our bill the supply house charged us 28 cents a foot. That 3 cents seems tiny, but it is an increase of over 10% and the quantiy is huge. When we called and told the supply house that every other supplier was still charging 25 cents they would always say we (the supply house) just got our updated price for pipe and the other supply houses probably haven't updated their books.

So, about 30 years ago we closed our accounts at every supply house and pay C. O. D.. Since we are writing checks on-the-spot we haggle with the supply houses before placing every order and we have more bargaining power because they know we are not going to file Chapter 13 on them.

Ironically, there are many supply house who refuse to do business with us because they can't screw us at the end of the month, and because we are onto their game, and they don't want us to mingle with the dummies who don't mind getting ripped at the end of every month.

One more reason we pay all bills as soon as possible is to get the money out of our checking account as soon as possible so we know exactly how much we have left to run the business and for personal investments. Suppose we owe $50,000 in bills and we have $75,000 in our checking account. If we don't pay our bills as soon as possible we may think we have more money than we can spend, purchase a large item that could wait, and cut our checking account too short before we pay our bills.

Paying your bills is good money management. Pay every bill immediately and what is left is yours.

__________________
"The glass is always half full"
FREE MANUAL AND SOFTWARE
http://www.contractortalk.com/f65/up...ps-free-72501/