ARE YOU PAYING YOUR SUPPLIERS TOO SLOWLY ?

A common practise among many organizations, is that they don’t pay their suppliers on time.

These could be suppliers of stock-in-trade, or even support materials and services like the stationery vendor, printers, transporters etc.

In the short run, it appears that cash-flows improve. However, in the long run this has a serious negative impact. This happens through word-of-mouth where existing suppliers tell others about the firm’s poor payment record; and gradually over a period of time they could make small reductions in channel margins, with-hold other benefits and extra margins being offered by a manufacturer. In the worst case, they could even stop supply altogether.

Keep in mind, that just like you, they too are trying to keep abreast of their business and payment cycles.  And if you think that changing suppliers is easy, remember that new relationships take time to mature, and new suppliers may ask you to keep a deposit or pre-pay towards some of the initial orders.

Keep track of your bills

A simple spreadsheet with pre-fixed reminders can be an effective tool in ensuring your bills are paid on time. Keep a record of the value of these invoices, as well as the aging of each.

If this is handled by an accounts team or someone else, ensure that you get this information on a weekly basis as part of your business review.

Know your suppliers real terms

In some cases the supplier may be critical to your business and you cannot have him holding back any order fulfilment to you. Some of the smaller and casual purchases that you make may be non-recurrent and you could look at asking those suppliers for a few days more.

Keep the orders flowing

Even if you are going through a tough period, remember that your suppliers want you to stay in business. They just want you to pay and they want future orders from you too.

 If you feel you are going to miss a deadline, call in advance and discuss it and work out a solution.

If for some reason there are any disputed invoices, returned / damaged goods, warranty issues etc; take the time to resolve them and not allow them to stay pending. Never use that as an excuse to not pay.

Don’t avoid the Calls

If you have been receiving collection related  calls frequently, don’t avoid them. Ideally you could have someone dedicated to handle these calls and explain the situation. If they call you directly, take the call and discuss a re-payment plan if possible. If for some reason you cannot take their call, make sure their calls are returned. Never avoid them by not answering your phone.

Use order deposits / staggered payments

If you are selling business to business and you make a new customer, it is quite acceptable to ask for a deposit in advance as a part payment. These could be used towards paying your suppliers upstream for these fresh orders.

Alternatively if you have fallen behind on payment, it helps to break up the amount into smaller amounts and pay them at a certain frequency rather than stress about a single large payment.

This also helps to build trust, that you are sincere in paying.

Remember :

No Suppliers = No Products = No Customers

The author Kevin Green is a Senior Consultant at Cogent Retail Consulting, a business advisory firm that is widely acknowledged in the multi billion dollar emerging Retail Industry in India.
 For more insights, and articles on improving and managing your business,
visit their blog:  www.the-cogent-beacon.com

You can find them at :  www.cogentretailconsulting.com
or email them at : enquiry@cogentretailconsulting.com