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IMPROVING YOUR CREDIT BY PAYING BILLS LATER, RATHER THAN SOONER!
and
*Every business will get to the point where suppliers will offer terms on
*bills, rather than requiring payment up front or on delivery. Their bills
*will probably be marked "2/10, net 30." This means you get a 2% discount if
*you pay within 10 days, and the bill is due within 30 days. Many business
*owners will jump at the opportunity to save the 2% by paying early, and
*rightfully so. However, believe it or not, they can help their credit
*rating by paying at the end of 30 days.
and
*How is this so? It's all a matter of your business' CREDIT HISTORY. All
*of the companies who offer you terms will be reporting your history to
*various credit bureaus. These bureaus are who gets consulted by banks when
*they decide whether or not to give you a loan.
*
*By always taking advantage of the 2% discount, a business establishes a
*paying pattern. Thus, if you've been paying a company's bills in 5 days
*for the past year, this is what they will expect from forthcoming bills.
*Now, say one month has a tighter cash flow than normal, and you must take
*20 days to pay that bill. This sends up a red flag for the billing company. You
normally pay in 5 days, why are you now paying
 | in 20? Even though you paid the bill well within the deadline, you have given a
sign that you had a cash flow problem. This u
*neven paying pattern can show up on your credit rating. Even though all your bills are
paid on time, an uneven paying pattern c
*an jeopardize your future chances for more and larger credit limits. |
and
*Now, if you always pay your bills on the 25th day of the due period, even
*when you can pay them early, that cash poor month won't look any different
*to the billing company. Most companies would rather grant terms to a
*company that always pays on the 25th day, than one that sometimes pays
*early, sometimes pays later, as this reflects an image of disorganization
*and uneven cash flow.
and
*Also, always paying toward the end of the due period will aid your cash
*flow. If you pay your bills consistently, at the same time every month, you
*will not be surprised by a sudden cash shortage. For example, say you
*decide to pay a bill early one month. Then, the next week, your main
*supplier calls to tell you about a closeout deal he has that would double
*your profits. Only problem is he can't offer terms, it has to be cash.
*Because you paid that bill early, you can't take advantage of the special
*deal. If you would have waited to pay it, your cash flow would have allowed
*the purchase, and the resulting higher profit margin would have yielded the
*cash to pay the bill.
and
*So, you see, paying bills later, and not taking advantage of any early
*payment discounts, CAN work to your advantage. You need to consider your
*future plans and decide if saving 2% now is really worth it.
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