To improve your cash flow and avoid paying for goods before you collect the cash from customers, you could negotiate favourable credit terms with a supplier or vendor. Holding onto your cash longer is like a small loan.
Here are some tips:
- Attempt to push a 30-day credit period to 60 days once you’ve established a good relationship with a vendor and have paid your invoices on time.
- Formulate a plan to strategize how you will approach the supplier or vendor.
- Ensure you have a good relationship with this vendor, so you are more likely to receive better terms. If not, take the time to build a better relationship first.
- Try to understand their business more as this will put you in a better position to negotiate.
- Ensure your proposal benefits both sides. Think about what you could offer in exchange for a longer payment term, like purchasing more from them once sales increase.
- Have other suppliers in mind to approach and use that information as a negotiation point.
- Be honest, it goes a long way. If you need better terms because you’re in a cash crunch, simply tell them that.
- Consider how much volume you order from the vendor and how that may compare to their other customers. Be reasonable in your expectations.
- Ensure you are talking and negotiating with the right person. This may not be your salesperson, but the company’s national sales manager or maybe even their COO or CFO.
Source: Gateway Commercial Finance
Here are a few more ideas to increase your cash flowing in before it goes out: