#21 - Cash Flow Management : Split money payment method to vendors for outstanding payments

Cash Flow Management: 

Split money payment method to vendors for outstanding payments.

You have ₹5 lakhs in hand and you have 10 vendors to pay, with outstanding amounts ranging from ₹1 lakh to ₹25 lakhs. What method will you follow?

There are many options, such as clearing the complete outstanding of as many vendors as possible, or clearing the vendor from whom you have to make the next purchase, and so on.

There is another method to pacify the vendors: split the money and pay all of them. This can be done either by paying equal amounts or by paying based on their outstanding balance.

For the ₹1 lakh vendor, you pay ₹25,000 from that.

For the ₹5 lakh vendor, you pay ₹50,000 from that.

For the ₹25 lakh vendor, you pay ₹75,000 or ₹1 lakh from that.

This will create an expectation among the vendors that the organization is making an effort to clear their dues and cares about settling their debts.

I am not suggesting this as a perfect method, but it will reduce vendor payment pressure significantly when cash flow is not in a good stage or when the organization is coming out of a major dip in business.

This will help the business move forward, and some vendors, even if there are outstanding payments, will support you for the furtherance of your business.

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