27 Nov If You Say You’ll Pay in 30, Pay in 25
It sounds so simple, but it makes all the difference. Keeping your word is good, but over delivering is always golden, especially in matters of money and the heart.
The center of business is people. Most entrepreneurs tend to miss out this fact as they focus on strategies that benefit their self-interest. One basic principle in business school is to make sure you make a buck for your shareholders, one way or another. Unfortunately, this principle tends to miss out the other people involved in your business. A business naturally has many stakeholders, many people attached to it. While it is natural to profit, it doesn’t make sense if you do it to the detriment of the other people you work with. With this in mind, when was the last time you paid your suppliers on time?
If you put too much pressure on your limbs, you’ll start feeling uncomfortable since the blood can’t flow freely. And even if the affected part is only your limbs, your whole body feels the impact. The only way to ease it is to relax the pressure. Just be cautious, if you hold the pressure too long, your limbs may lose its function entirely, and things may never be the same again.
The same applies in business where money acts as the blood. If you do not fulfill a payment commitment to a partner, you’ll cause a massive burden and bottleneck on his cashflow requirements. And the more you prolong the delay, the more it affects your relationship with him.
All businesses are run on trust. Once broken, it’s hard to mend, and the network effect makes things worse. People naturally talk to others about their issues, and one bad feedback can spread like wildfire. Although it is true that you cannot control one’s opinion of you, you have to make sure it’s not something you caused yourself by stepping in someone’s toes.
Network effect can also work for you. Imagine, if, in one industry, you’re the only one who pays on time? Wouldn’t suppliers and partners treat you better than others? I learned this after shadowing JJ Atencio, our Chairman. During his time as CEO in 8990 Holdings, one of the biggest mass housing developers in the Philippines, he told me the one key factor that made all the difference in making his business grow — he was the only developer in the industry who paid their suppliers and brokers on time, or even ahead of time. This is how they attracted the best people to work with for their business. True enough, 8990 Holdings remains to be one of the key players in housing to date.
Pay in 25 — In the Philippines, a study conducted by our company, Acudeen, together with Dun and Bradstreet Philippines, showed that only 11% of Philippine companies pay on time. A company’s financial discipline is a good representation of how a company runs its business overall. Like a human body, if you exercise, you live a long joyous life, if you don’t take exercise, you mess it up. You have to run your company as you would run your life, keep your integrity intact and take care of the people you work with.
As an entrepreneur myself, I value my relationship with people I work with. Employees, partners, suppliers, shareholders, as much as possible, I’d do anything to keep my integrity intact, even if some sacrifices on my end needs to be done. You can screw up your reputation easily, but it takes generations to build it up. Admittedly, I’ve made mistakes in the past, and there are relationships that I lost along the way. All entrepreneurs do, but this is how we learn.
It is true that not every day is going to be a good day, and you will have to go through bad times, and at that point in time, you have to make sure that you keep your communications line regular and open. People will naturally become emotional and they would feel disappointed, but that always happens when people don’t meet their expectations. By keeping the communications steady, the confidence of your partners in you remain.
At the end of the day, the choice is for you to make. Luck you can try to create, but business practice is under your control. Your business will definitely face tough times, but you have to make sure you maintain the highest level of business integrity, standards, and reputation for generations and generations. This will protect you and ensure that you will have a business to hand over to the next one in line. So if you want to keep your legacy, it all starts by making sure, that if you promise to pay in 30, pay in 25.