There’s a famous quote about brand by Jeff Bezos, the founder of Amazon.
“Brand is what people say about you when you’re not in the room”
This is a useful way of thinking about brand and it certainly has an application when it comes to business finance. What do your clients and suppliers feel and say about you when it comes to your financial transactions with them?
If asked, we can all recall suppliers or clients who have been painful to deal with in paying or receiving monies. So, if our financial reputation is that memorable it stands to reason that this has a real, lasting impact on how the people around us view our brand.
Think beyond the transactional
Cash flow forecasting and management is key to being able to negotiate periods where cash flow is tight without suffering reputational damage. In the same way that we come to know people for their ongoing personal traits, we come to know how our peers deal with financial matters and their attitude to payments. There is a cumulative aspect if we are slow to pay bills on a number of occasions or constantly want to re-negotiate terms at short notice. For our suppliers it’s often a factor in how they treat us, if we acquire a reputation as being financially organised, swift payers they are more likely to cut us a good deal, they will want our business more than someone else’s who is stressful to deal with.
Did we have a clear understanding about terms from the outset? Often uncertainty or minor disputes arise because all parties were a bit wooly about the agreement from the beginning.
It’s very easy for us to view transactions in isolation. We know that a certain payment we need to make might have to be delayed for a specific, temporary reason. But how do we know partner organisations understand this and are reassured that there isn’t a more serious problem that puts them at risk?
Communication is key
Delaying payments without communication could damage your supplier’s business or contribute to their failure. This is never good practice – speak to your supplier if you need time to pay or to your client if their payment habits are negatively affecting you. The key principles are:
- Agree terms and pay within those terms
- Raise queries promptly
- Ensure you know if you need a purchase order number quoted on invoices
- Factor supplier payments into your cash forecast
Why pay promptly?
- It demonstrates your respect for the people you do business with
- It may allow you to negotiate better terms, deals or discounts
- It avoids late payment charges
- It avoids suspension of services or non-delivery of products
- It makes you a valued client
If you’d like to understand more detail about how you can take control of your cash flow management, I’ve produced a free e-book packed with useful tips for business owners on how to understand the subject and plan better.
I also welcome the chance to talk to business owners about the subject and help in any way I can. I run a Business Finance Club based in Dorset which meets on a monthly basis and is a friendly forum for business owners and accounting professionals to share knowledge. You’d be most welcome to join us. Alternatively if you’d just like to chat on a 1-1 basis then my door is always open.