May 27/June 3, 2019: Volume 34, Issue 25
By Lou Morano
(Editor’s note: This is the first installment in a multi-part series.)
I’ve learned things from smarter people than myself, even after being in this industry for 38 years.
When our company first opened, I learned from my father that paying our bills early was going to be very critical if we wanted to be important to our vendors. He managed the books in the beginning, and he paid every invoice in full every week. Back in the ’80s, invoices were very similar to today. They were either net 30 days or you would get a discount on some invoices of 5% 30 days. Yet my father paid every invoice in full every week. I asked him why. He explained that if you pay your bills as quickly as possible, the vendors will look to sell you as much as possible at more attractive prices because they know they will get their money quickly and with no hassle.
More importantly, paying your bills on time—all the time—makes you a very valuable partner with the vendors. Suppliers will bring programs to you first. They will want to help you be as successful as possible so you can continue to buy more of their goods.
As we have grown over the years, we don’t pay all our bills in full every week, but we have paid all our bills on time or early every time without exception since 1985, when we incorporated. We have never been late—not once. Over the last several decades we have been told time and time again by various vendors that we are a much more valuable client than some others because of how fast we pay our invoices. If you are late with payments and/or are a hassle to do business with because they must chase you for their money, then they are less apt to do any of these things for you.
The flooring business—much like many businesses—is all about relationships, which is why it’s critical to view every vendor as a partner. When we treat them like a vendor, they will treat us like a customer. However, when we view and treat our vendors like partners, they view us and treat us like partners. This is a whole different level of doing business with tremendous advantages for everyone when we think this way.
One of the main benefits of paying your bills early or on time is the access to discounts. I strongly encourage retailers to take advantage of every discount possible, as this directly affects your bottom line. Let’s say, for example, you have a $3,000 invoice and the terms are 5% 10 days, net 30 days. If you pay after the 10 days, you have given up $150. Now, let’s say you have a line of credit that costs you to borrow money at 8% annually. You are much better off borrowing from your line of credit as it will only cost you 0.67% in 30 days, which on $3,000 is only $20. If you add up all the invoices in a year you can only imagine how much money that totals over time. Even if you must borrow the money on a credit card at 18% interest annually, that would be 1.5% in a month, which is still only $45.
Paying your bills on time not only makes good financial sense. It also ensures you have product exclusivity, the best pricing and optimal service from your vendor partners.
Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet, Inc., and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions.