Are Your Vendors Happy?
by Rick Boxx of Integrity Resource Center.
“Do I pay staff, payroll taxes, or the vendor?” After staring at the checkbook it was obvious I could only do one of the three. This is a dilemma many business leaders have faced, but now the decision was mine.
Most business owners would say pay the employee first, payroll taxes second, vendor third. I doubt that many would have told me to pay the vendor first.
The biblical way
I chose what I believed to be the biblical way. I paid the vendor, then the taxes, and then the employee. Was it painful? You bet! Would I do it again? Yes. Let me tell you how I worked through this process.
The vendor’s invoice was for work performed almost two months earlier. The taxes owed were for the previous month’s payroll, and the staff payroll was for the last two weeks’ work. As I prayed and chewed on this problem, I knew there were some important principles to consider.
Number one was Proverbs 3:27-28, which says, “Do not withhold good from those to whom it is due, when it is in your power to do it. Do not say to your neighbor, ‘Go and come back, and tomorrow I will give it’ when you have it with you.”
Secondly, the Bible teaches not to withhold a man’s wages overnight, or in our day, pay him when the work is done. We are responsible for anyone who performs services for us, not just employees. Our vendors provide products and services on our behalf. The IRS is a vendor who represents the government and our employees.
Most business leaders would pay staff first because of their intimate knowledge of that person’s needs. The vendor’s needs, and the IRS’s needs are not any less important; it’s just that we don’t have to look at them everyday.
Accounts payable turnover
Accounts payable turnover is one gauge of how you are doing in paying vendors. Accounts payable divided by your annualized cost of goods sold multiplied by 365 days will give you a number that reflects how many days on average of accounts payable are outstanding. If your suppliers bill you on net 30-day terms, the hope is that the number will come in at 30 days or under.
When determining whom to pay, remember to remain impartial. God cares about all of the people you owe, so do what’s right, not what’s convenient.
Rick Boxx is the President of Integrity Resource Center (IRC), a nonprofit ministry providing biblically-based resources, training and counsel to business and ministry leaders. You can learn more about IRC by visiting their website or by emailing.
Originally posted 11/13/2012.