To keep your business successful it is important to keep a close eye on cash flow. If you do not control how much money is coming in and going out, your business is most likely to experience the threat of bankruptcy. Having a lot of accounts receivables can prevent your business from prospering and while you may not be able to control when customers pay you, you can certainly improve your own payment terms in order to avoid payments that are past due date.
To negotiate favourable payment terms with your suppliers, you will not only strengthen your business relationships but are able to establish terms that better suit your needs, for instance, extended payment periods or split payments. To help you improve your payment terms with suppliers, we have put together eight tips for you to keep your business as thriving as ever.
Keep a good relationship with your customers
To keep your suppliers on good terms, communication is the key. A quick phone call now and then is much more personal than a simple email and if you can, meet them face to face whenever possible to build a strong personal relationship before seeking adjustment to your payment terms. Make sure the supplier is comfortable working with you and try to respond to their requests on the same day to make them feel respected.
Pay invoices on time
Your suppliers will remember you as a reliable customer if you always pay on time and keep you in their good books. Take notes of the incoming invoices and when the next payment is due to rule out the possibility for you to pay late. You can also make your suppliers aware that payment is on its way by sending out a remittance advice, a method that is much appreciated by accountants and a very good way to extend communication.
Invest in accounting software
Accounting software programs will help you stay on top of your business finances by setting up reminders and making sure that invoices are sent out and paid on time. Such system furthermore helps you to oversee cash flow and cuts costs, as it can be a painful process for your staff to track cash flows, incoming cash and late payments which can take up a huge amount of valuable time.
Negotiate payment terms
It is advisable to review your supplier terms frequently and look for discounts on early payments to save money. Maybe it is even possible to extend your payment terms from 30 to 45 days. Keep in mind that the new terms you are about to negotiate need to be favourable for your supplier as well, hence make sure that the terms you are about to offer will benefit both parties.
Promote healthy competition
It is always helpful to bring in two or three competitor’s quotes in next time you negotiate with the supplier. This way you demonstrate you know what’s going on on the market and alternate costings for the same goods or services you provide in order to be able to adjust payment terms in your favour.
Keep debt collectors away
No matter how successful your business, there can be a time when you encounter a cash flow issue especially when one of your own customers pays slightly later than expected. If you already know you cannot pay your supplier by the due date, he or she will appreciate it if you pick up the phone or send an email to let them now. It is important to ensure the supplier that this is a one-off and you will certainly settle your debt as soon as the other payment comes in.
By following these eight simple steps towards improving your payment terms with suppliers, you are not only improving internal processes but establish stronger business relationships.