# Paying bills early vs holding till last minute



## Techie (Jun 18, 2009)

When do you guys like to pay your bills? 

I understand the psychological aspect of paying bills on time, and you can even get a discount if you pay within 10 day for example sometimes. However paying early limits the amount of interest you could have made with the money during the time period which your bill is due. To collect the most interest with the money you're about to use to pay your bills, you would naturally hold it as long as possible. I personally like the idea of keeping it as long as possible to collect as much interest as possible. 

I'm trying to get my employer to implement this "payment system" I'm thinking simply setting up a bank "online bill pay" system should handle it fine.

I'm curious as to what the rest of you do and what system you use to control and monitor your payments?


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## oldfrt (Oct 10, 2007)

A 10% discount for paying on time is better than anywhere I know where to get an equitable amount of interest.

I use an line bill pay ,but you have to make sure the actual transaction time is what you want


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## Mike Finley (Apr 28, 2004)

What business checking accounts pay interest?


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## CScalf (Dec 18, 2008)

checking no savings yes...:thumbsup:

but that is just too much shiit to move around, and more paperwork, having to track deposit to savings, moved to checking paid to xxxx FVCK that!


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## MALCO.New.York (Feb 27, 2008)

I prefer to pay "Upon receipt of Invoice".................... Or Designate a "Specific Day, 'early-mid-Month', to do ALL the paying.

Just makes for easier computations and "Peace of Mind".

Not to mention the "Credit Factor" whilst dealing with "Reporting Agencies".


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## ARI001 (Jun 16, 2009)

I prefer to pay when I get the invoice. I do understand where you are going with this and the whole cash flow concept though. I wouldn't recommend poking your nose to much into your employers financial practices though (unless your opinion is solicited) . All that should really matter to you is they have work, they get paid, they continue to have work, their taxes are paid, and you are paid on time. 

As far as checking accounts that earn interest; sole proprietors and general partnerships can have checking accounts that earn interest. Corporations and LLC's can not by law. They all can set up savings accounts. I know Suntrust and Stellar One both offer this to their business customers.


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## user38755 (Jan 1, 2009)

I guess I'm old school. I pay for everything when I get it as I go. I don't believe in credit and only have one credit card. I have know idea if it works or not as I don't use it. Hell I hate having a $332 house payment and if not for the tax advantages I wouldn't.


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## AJAX (Sep 12, 2009)

MetalBender said:


> Hell I hate having a $332 house payment and if not for the tax advantages I wouldn't.


That's great! I wish I only had to pay that much on fuel each month.

If it's a sub or vender, I'll pay upon reciept. 
I pay at the last minute, when it comes to the banks. How is it that they can pay 90-120 days out as standard practice but, if I'm ONE day late they can take everything I have on credit and bump it to 22-28%? Crooks! :furious: Not that, that's happened to me, I just like to read the fine print.


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## Techie (Jun 18, 2009)

Thanks for the opinions!

It's part of my job to recommend and comment on business practices so I'm always looking to make things more streamlined and efficient. Didn't know a law limited interest to only savings accounts for businesses, thanks for that tid bit!

I do agree that if you can get a 10% early payment discount then that's probably better than any interest you'd earn on your savings account over the 15-20 days that you might hold back payment.

Question: if you have do online banking and transfer money from savings to checking... is it available in checking immediately or must it wait till next business day?


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## tgeb (Feb 9, 2006)

I have a commercial savings and checking.

All deposits go into the savings account, then transfered as needed to the checking account.

My online transfers are completed in real time even on holidays and weekends.

Back in the day....I made out pretty well on the interest income. These days however the bank is paying out at a whooping 0.15% annually. :sad:


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## Warren (Feb 19, 2005)

MetalBender said:


> I guess I'm old school. I pay for everything when I get it as I go. I don't believe in credit and only have one credit card. I have know idea if it works or not as I don't use it. Hell I hate having a $332 house payment and if not for the tax advantages I wouldn't.


Might wanna check with your tax guy, but with a $332 house payment, I doubt there are any tax advantages. For 2009, Your itemized deductions, if you file jointly, must exceed $10900 before you get even one cent more.

As for the payment thing, I try to pay every invoice as I receive it. I know I appreciate people who pay quickly and try to provide the same thing for any subs I use.


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## JK Floors (Mar 15, 2009)

Techie said:


> I do agree that if you can get a 10% early payment discount then that's probably better than any interest you'd earn on your savings account over the 15-20 days that you might hold back payment.


Probably? If I could get a one percent discount it would be far far better to pay the bill. Never in my life have I earned close to 1 percent interest in any checking or savings account over a month.




Techie said:


> It's part of my job to recommend and comment on business practices so I'm always looking to make things more streamlined and efficient. Didn't know a law limited interest to only savings accounts for businesses, thanks for that tid bit!
> 
> I do agree that if you can get a 10% early payment discount then that's probably better than any interest you'd earn on your savings account over the 15-20 days that you might hold back payment.
> 
> Question: if you have do online banking and transfer money from savings to checking... is it available in checking immediately or must it wait till next business day?


I am having trouble understanding how I might take business advice on managing my money from someone who doesn't seem to understand the basics of banking and bill paying.


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## user38755 (Jan 1, 2009)

Warren said:


> Might wanna check with your tax guy, but with a $332 house payment, I doubt there are any tax advantages. For 2009, Your itemized deductions, if you file jointly, must exceed $10900 before you get even one cent more.


 I have, that's the reason for the loan. Not itemized till over 42,000 and something so I stay close to it for $7700 tax credit without having to itemize. No tax break at all with out a home loan.


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## pradeep1 (Aug 20, 2008)

Yeah, we pay our bills twice a month - once in the middle and the once at the end to prevent from keeping track of everything to the day. On those rare occassions a supplier gives hefty discounts for prepay, we mark those for immediate payment, but that is rare.


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## IHI (Dec 25, 2004)

Take the money and run, dont pay bills at all, abuse credit lines and accounts to the fullest, when they baulk, open new ones under a different name.:clap: Seen a handful of guys around here that seem to be living it up under the current method above.

For us, bills typically twice a month, just depends what accounts we have been using. Labor gets paid weekly, subs get paid same day. I've never seen a savings/checking account through local banks that paid enough interest to justify waiting until the last possible second to pay a debt in order to "try" and make more money off your money just sitting there.


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## Ohmy (Sep 10, 2009)

We pay on receipt. We expect the same from our customers.


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## Grumpy (Oct 8, 2003)

As fast as the money comes in, I send it right out. This is a cash flow business the cash keeps flowing. I pay bills no less than once per week.


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## bob_cntrctr (Jan 30, 2008)

What the OP describes is in fact the fondation of the business model of some of the largest and most successful businesses on the planet. 

In Europe the have mega retail chains. Years ago smaller retailers complained that the mega chains were charging basically cost for products, which they couldn't compete with. The chains had discovered the combination of market elasticity and differential payment terms.

They negotiated long payment terms to their suppliers - 60, 90, 120 days or more. But they received payment on the spot, being retail. What that meant was that they had maybe a quarter of their annual gross sales in the bank at any moment. A tidy sum when your annual sales are maybe a billion dollars. Then they found that lowering their prices brought inmore business than they lost from the reduced margins, so their gross sales figures actually went up on lower unit prices, meaning they had more inthe bak collecting interest the less they charged.

The retail activity became nothing more than a flow-through vehicle to keep the bank accounts topped up with cash and they made their real profits from investing these huge sums.

The principle is sound, Techie.


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## plazaman (Apr 17, 2005)

Grumpy said:


> As fast as the money comes in, I send it right out. This is a cash flow business the cash keeps flowing. I pay bills no less than once per week.


Right, i hate having to owe people. 


So you get net 20-30 days... Use a CC that earns you points and get another 30 days to pay... what about that idea?


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## dvon104 (Jun 23, 2007)

All accounts are net/10th....to be paid on the 10th ...after the 20th you will incur a 1.5% finance charge....if previous month is not paid by the close of business on last day of month next day account will be placed on credit hold and nothing will ship ....

A 10% early pay is unheard of and if your supplier is giving it to you ...well then your being OVER CHARGED for material in the first place ...24-27% GROSS margin is the norm in building supply business...after expenses and etc if you can net 2.5% on the bottom line well your the cream of the crop....most yards only give 1-2% "prompt pay discount"...if you knocked your GROSS margin dollars down to 14-17% after "10% discount" you will go out of business...Do you give a 10% discount ? Have you ever looked at what that does to your bottom line ??....

As for "holding out payment" ...I give (as well as most yards) their BEST price to the contractors who pay on time everytime...so that 1 to 2% your "earning" is most likely costing you 4% in the end.

We pay our bills and employees with A.R. dollars... ...well most wholesale companies are net 10 days...means payment in full is due in 10 days...so that material you have on your job is most likely already paid for by your supplier....and you "holding out" is bad business.


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