Late payments are a huge problem. With so much advice floating around about always paying your vendors late, that tactic to improve your cash flow can be incredibly tempting.
Some business operates entirely by paying as late as possible. While your vendors will prefer late payments to never getting paid, it won’t do you any favors with them. Promoting the business style of late payments turns into a vicious cycle of everybody paying late, because they get paid late.
If you pay your vendors late, you get to keep the cash in your account for a little while longer. Cash in hand is one of the most important parts of running a business. If you pay on time and an expense comes up, depending on your "cash in hand" situation, you may be short for something like payroll or office rent.
If your clients consistently pay you late, it has a huge negative impact on "cash in hand". You cannot pay your bills until you get the money you are owed. This can decrease employee morale, damage your relationship with your vendors, and possibly stress your credit limit with your bank. Not ideal at all.
By paying attention to your cash flow, you can time all your incoming and outgoing payments to minimize the risk of situations where you don’t have the funds to cover your expenses. Using processes that ensure your clients pay you on time, lets you pay your vendors on time. It’s a better situation for everyone. You have the means to provide and develop new amazing solutions for your customers, and your vendors are more willing to go above and beyond for you.