Improve Your Credit

Businesses usually use terms on bills instead of paying up front or on delivery. Terms on bills means they would get a specific discount if they pay within a specific time frame, for example if the bill is marked “2/10, net 30”, this means you the business owner get 2% discount if they pay within 10 days, and the bill is due within 30 days.
Many Business owners will take advantage of this opportunity to save 2% by paying early. However, they can help their credit rating by paying at the end of 30 days.
It is because of the CREDIT HISTORY. All companies who offer you terms will be reporting your history to several credit bureaus, which gets consulted by banks when they decide whether or not to give you a loan.



Business owners establish a paying pattern by taking the advantage of the 2% discount, by paying in the first 10 days. If 1 month the business owner did not pay within the 10 days period due to cash flow problem or ay other reason, a red flag will be sent to the billing company.

This is uneven paying pattern could give the sign that the business owner might have a cash flow problem and this problem can show up on the business owner’s credit rating.

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.

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.



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.