Let me today translate my last article on debtors (receivables) to creditors (payables).
For a kick-off, your enterprise’s outstanding liabilities or debts for goods and services procured from your vendors or suppliers are known as creditors or payables. Payables or creditors management therefore relates to the management or administration of these elements of your business. The elements of receivables, payables, cash and inventory (stock) are critical items in optimizing your working capital, and you can walk tall as an entrepreneur if you are smart in this. Now, you don’t need to trivialize this component of payables in your business. I’m saying this because many entrepreneurs don’t take things like optimizing and proper payables management seriously. Some may even laugh at why I’m making this big business. They assume this just relates to receiving bills which they stash away in some old tray or file for bills, or forward to the accountant, and then the next is payment. This is not a joking matter!
Do you know that trade credit is indeed one of the easiest and vital short-term source of capital for funding your enterprise? Are you aware that more cash can enhance service delivery, reduce costs and improve your business? Do you know that this element of working capital requires efficiency and effectiveness in its management, to save precious time and other resources in the enterprise? If you have a sizeable business and bills flow in good numbers on a daily basis then you might have an idea about what I’m talking about here. Do you know that poor payables management can sometimes eliminate your access to more credit for goods and services you critically need, or even make someone drag you to court and tarnish your business reputation? Has it ever occurred to you that your businesses can lose big money through poor management of payables?
I could ask questions until you get very bored and run away from the article, but that is not my objective. My objective is to retain you to continue reading this blog, as we share knowledge about enterprise management. It might be useful in one way or the other. What I’m saying is that good payables management adds value to your business. It can free up working capital (cash element) to engineer growth and profitability in your business. Receivables management also has an impact on your payables management. You need to strike a balance between delaying settlement of bills to free some cash for your enterprises, and delaying too much to the extent that problems arise in your business because of this. Do you understand me? If your business is a big one (though this term is also relative) you might need to develop a clear strategy to manage and optimize your payables. This may be more complex than those for smaller enterprises.
So, what are these points that can guarantee you the best from your creditors or payables?
Please share these tips and best practices for management of payables with anyone or business colleague you think will benefit from it. As I mentioned before, our goal is to develop entrepreneurs who can run sustainable businesses that will have positive impact on humanity. I guess you have found this article useful. Haven’t you? The fact that you have read it until this concluding paragraph shows me that you have got some value from it! I’m assuming that you never jumped to the conclusion after reading only the first paragraph!
With best wishes for a successful payables management in your enterprises, always
The Wise Entrepreneur