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Cash is Tight, Who Do I Pay First
May 29, 2007
Cash is the lifeline of any business and when cash gets tight customers stretch their payments, stop paying altogether, or try to renegotiate their deals. Meanwhile, there are those you have to make payments to.
Make no mistake about it, during tough times, you want to pay everybody on time, but sometimes it simply isn’t possible. When cash gets tight try prioritizing like this:
People you should pay first:
- Vendors and manufacturers that are essential to the continuation of your business.
- Key employees. If your business runs on a particular sales veteran—don’t think twice about paying her/him later just because, “Well she’ll understand because she’s been working for us so long.” This should not be the case because he/she could be the one keeping the business afloat during these tough times.
- People who threaten to sue you or just make your life literally miserable.
- Any leases, contracts, loans, or credit cards that you have personally guaranteed. If you fail to make at least the minimum payment every month, they can put a lien on your house.
- Lawyers and accountants.
People who can wait to be paid:
- Any manufacturer or vendor that screams or yells a lot. In the jewelry industry, this is usually the case with smaller dealers whom you’ve only purchased an item or two from. They will call nonstop, yell, and scream hoping that you will pay them off just to get rid of them and avoid further aggravation. This is a very effective strategy, especially when the amount involved is small.
- People who have awaited payments before. Just because a manufacturer’s receipt says, “payable in 30 days” doesn’t mean you have to. Most people will wait 60 days before they take action.
- People who haven’t demanded payment yet. Most of the times manufacturers, vendors, etc have to send you a written notice, via certified mail, of a late payment before they can take legal action.
Dealing with irritated creditors is never easy and you should always strive to pay them on time, but when cash is tight, sometimes you have to prioritize by being cruel to ones that don’t add daily value to you business and kind to those that do.
Posted by Shanu Singh Guliani on May 29, 2007 | Comments (0)
