It’s vital to build a strong relationship with your suppliers, they will help when things get tough and give you a strong foundation for building your business.
The first step is negotiating your payment terms;
- Ideally you need to ensure that these are longer for your suppliers than for your customers
- Payment terms are sometimes quoted as net, monthly or end of month. For customers stick with net terms i.e so many days after invoice date (or at point of order where possible) – for suppliers aim to get end of month terms as that will give you a little more time to pay, depending on the invoice date.
EXAMPLE – Invoice dated 15th July – 30 days net – Payment due 15th August 30 days end of Month – Payment due 31st August – giving you 16 more days of cash in the bank!
Some suppliers will insist on proforma invoice/payment in advance especially for your first order. TOP TIP – only buy items likely to sell fast and go for an order as low as possible. It’s too easy to overcommit yourself and be too optimistic about the possibilities – so be careful!
So – how do you keep suppliers on your side?
- Get to know your supplier, visit if possible, introduce yourself at trade shows, pick up the phone, have video calls.
- Tell them about your business, what you do, what kind of products you are interested in, find out what is new with them, what their future plans are etc.
- Make payments on time and ALWAYS keep your promises, If you say you will pay on a certain date make sure you do. This will build trust & enable you to get better terms in the future.
All these tips will help your relationship flourish. You may be the first to hear about new products, hear about offers first, and give you a competitive advantage!
And – if things go wrong?
If cash becomes an issue, if you are awaiting customer payments and you can’t pay?
TALK! Explain what the issue is, ask to extend payment terms or for a payment plan. Remember though whatever you agree ensure you stick to the agreement (see point 3 above!)
If you have any questions or concerns about cash, need a plan or advice – I am here to help you!