The conviction lingers on that only unreliable companies do not pay their debts. In fact, bad intentions are the underlying reason of only small number of problems. The majority of them is a result of necessity, since the companies have their budgets calculated ‘too tightly’.
Deferring payment deadlines is a standard practice in several trades and waiting for payments forces the entrepreneurs to make difficult decisions – which liabilities and in what order should be satisfied? An entrepreneur poses the following questions:
- Which supplier can we take liberties with?
- Which supplier will allow us to delay more and which will show no mercy?
- Which of them will cause trouble if I do not pay on time and which has not choice and has to wait for me?
In consequence, the entrepreneurs delay with making their payments when they do not need to make them on time and they are ready to use every excuse. Not only those companies that face problems behave like that, but also big companies of good standing. Making use of their strong position, they impose conditions, on which the transactions are to be settled. For instance, big trade networks, cooperating with many small suppliers may behave like that.
Such practices lead to the situation, in which a company must be prepared to settle its accounts with deferred payment deadlines (using the so-called trade credits), since there are such standards on the market.
The time when debt collection was initiated in exceptional situations and companies did not appreciate the value of settlements has already finished. At present, in order to avoid insolvency, you just be pragmatic and use many tools to protect the financial standing of your company.
Which mistakes can be avoided? Which mistakes do we make most often?
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Published on: 9 November 2016