The Financial Benefits of On Time Payments

Are your suppliers paid on time ? If not, you’re simply losing money!

Every late payment costs money in the form of fees, penalties, & potential loss of discounts. And it damages the organization’s reputation & Brand.

This can also lead supplier to financial difficulties, which in turn can impact their ability to deliver goods & services on time.

Why do we need to pay suppliers on time?

Build trust, loyalty, and collaboration.

Suppliers can invest in their businesses, pay their employees on time too (I have seen this impacting professional services providers multiple times).

Suppliers will more likely prioritize your business, mitigating the risk of supply shortages and delays.

It improves your cash flow, reduce financing costs, & avoid penalties for late payments.

Who’s responsible for payment on time? Account Payable and not Procurement as I’ve heard many times.

While PTP team follows up on supplier payments, account payable is the department primarily ensuring timely payments.

So let ensure suppliers are paid on time !

Financial Benefits

• Avoidance of late payment fees: Many suppliers impose penalties for late payments, directly increasing your costs.
• Potential for early payment discounts: Some suppliers offer discounts for early payment, reducing your overall expenditure.
• Improved cash flow: Timely payments can improve your supplier’s cash flow, potentially leading to more favorable terms, such as extended payment terms or lower prices in the future.

Legal Benefits

• Compliance with contracts: Most supplier contracts have specific payment terms. Failure to comply can lead to legal disputes and potential lawsuits.
• Adherence to regulatory requirements: In some jurisdictions, there are specific laws governing payment terms, and non-compliance can result in penalties and legal action.

Commercial Benefits

• Stronger supplier relationships: Timely payments build trust and loyalty with suppliers. Strong relationships can lead to better deals, priority service, and increased flexibility.
• Improved supplier performance: When suppliers are paid on time, they can invest in their businesses, improve their operations, and deliver better products and services.
• Reduced risk of supply chain disruptions: Reliable suppliers are more likely to prioritize your business, reducing the risk of stockouts or delays.

Reputation Benefits

• Enhanced business reputation: A reputation for timely payments attracts quality suppliers and customers. It signals financial stability and ethical business practices.
• Improved brand image: Positive relationships with suppliers can contribute to a positive brand image, especially in industries where supply chain transparency is important.
• Attracting new business: A strong reputation for timely payments can attract new business opportunities, as potential partners are more likely to trust a reliable company.

Let dive into more details!