Penny Wise, Pound Foolish – Why You Shouldn’t Pay Your Vendors Late


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We all know that running a company isn’t easy. Sometimes you feel the need to pay your vendors later so that you can sort your own finances out at the end of the month. However, it is seemingly becoming regular practice that somehow it has started a negative effect on the economy. Most businessmen decide to stall payments so that they can wait till the end of the month to count their own profits before deciding to pay their vendors and this is just really bad practice. Not just for the vendors but also for the entire ecosystem. Stop thinking about the short term benefits and start looking at the bigger picture. Please consider the damages you will be making to the future of your own company as well as the vendor’s company. In addition to that, also think about how it will affect the economy.

Why should you pay your vendors on time?

#1 It Helps You Save Your Money

This might seem a little ironic because it seems that if you take money out of your pocket to pay your vendors, you are also saving money which doesn’t make much sense. However, if you look at it along the lines of if you pay early, the vendors are more likely to offer you discounts off the original price and you get to save some cash, why not right? If you hold on to the payment much longer, you might rack in some interest on that payment that you can use for something much more important.

If it’s a big project, you can negotiate with the vendors for a discount if you pay everything upfront. However do keep in mind that you should not ask for a giant discount. The vendors need to stay afloat as well. Think of it as a mutual benefit. If you pay them good money, they will give you good services in return. It is the code of ethics at play here and if you want to stay in the business, you need to play by its rules.

#2 Avoids Poor Cash Flow in The System


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Poor cash flow is the reason many businesses go bankrupt. If you don’t have the money to pay your vendors, they in turn do not have the money to stay afloat or they would also not have enough money to pay their subcontractors. The more vendors that go bankrupt, ultimately there will be a decrease in vendors which increase the need for the vendors that are still working. Then, because of the decrease in vendors, or the decrease in supply, the prices of the services will then increase.

Ultimately, the action of you not paying your vendors on time will have a ripple effect to cause you to lose more money in the future. So it’s best to always pay the vendors on time and ensure a good and stable working relationship with them.


#3 It Maintains Your Good Name


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In the world of business, it always hold the connotation of “every man for himself”. However, over the years, it has been proven that your track record is even more important. The reputation that you will build over the years is the one that will make or break you in the system.

If you constantly pay your vendors late, the word will get around and sooner or later no one would want to maintain a business relationship with you. Who wants to working with someone as flaky as that? Money is a huge commodity and the fact that you pay your vendors late sends out the message that you do not respect them enough. That in itself is a horrible identity to be associated with.

To make sure that you never fall into that bubble, always maintain a good payment system and ensure that you always pay on time. It is your reputation and it is your responsibility to uphold it. You wouldn’t want years of hard work to go down the drain just because you were too lazy to pay up.

#4 Ensuring Excellent Future Service

As a continuation from the point above, it is a no-brainer when you think that if you pay your vendors on time, they will definitely return the favour with excellent future service. Everyday you meet different people that will have a lot of different things to offer you. It is crucial to make sure that you get the best service out there and the best way to ensure that is to always pay your vendors on time.

If the both of you can maintain a great relationship, why not extend that relationship. Rely on each other for the services. Vendors are more than happy to help you out if they get their end of the bargain. Treat others the way you would like to be treated. It is a win-win for you and your company!

What should you do if you have to delay payments?



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It is totally understandable that you might have a bad month one day and you would need to postpone your payments. However, there should be a few things that you would need to do to ensure that all parties are taken care off despite the lack of payment.

The first thing you should do is pick up the phone and call the vendors. Don’t wait for them to come and look for you. This should not be how it works. You are the ones owing them money, the least you could do is to make sure they know that you are delaying the payment. Give them a good excuse. A real one.

If you have some extra cash to start the ball rolling, you should make a payment. Just to tell the vendors that you haven’t forgotten about the payment and so that they wouldn’t start to take legal actions against you. It’s smart to never wait till the third or fourth late payment letters to come by. Legal fees are a lot more expensive that your original bill to the vendors!

Vendors need to sustain themselves too. So help each other out and always make sure that you don’t miss payments unless it is absolutely impossible.

If you are looking for vendors to help your business, head on over to ThunderQuote to submit your requests and we will get back to you as fast as possible!


ThunderQuote is the most comprehensive business services portal in Singapore, Australia and ASEAN , where hundreds of thousands of dollars of procurement contracts are sourced every month by major companies like Singapore Press Holdings, National Trade Union Congress and more.

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