For many business owners, balancing cash flow is always top of mind. Cash flow—or the money that flows in and out of your business—can be a problem for many, even those who have been in the game for years.
One quick and easy to way to potentially ease your cash flow issues? Work out more agreeable payment terms with your vendors and suppliers. Once you've developed relationships with them, you may find that they'll offer a little wiggle room—relieving some of your cash flow crunch and allowing a more flexible business budget.
Negotiating with vendors is a delicate process, and may take repeated attempts. But doing so can undoubtedly help you with expense management and help create a more stable business model. Here's how to get started:
Start building better relationships.
You should always strive to be on good terms with everyone involved in helping your business run smoothly—and your suppliers are no exception.
If you don't have good relationships now, examine why. Do you pay them regularly, respond to their messages promptly and check in often with conference calls? Creating a relationship with your vendors is not only good business, but it's also a sign that you're as invested in their success and well-being as they should be in yours. The people you speak with will remember that when the time comes for a favor.
Understand which suppliers are worth your time.
Not every supplier is going to be worth approaching about an adjustment in terms. Your business budget should show which vendors make up the majority of your spend, and thus which ones will likely require a conversation.
For smaller vendors, consider simply sending out a letter announcing a new set of terms due to changes in company policy. While some vendors may push back or argue, others (especially those that have a high-volume business) may accept your adjustments without complaint.
More often than not, your vendors will be happy to work with you to keep your business.
That being said, when you do approach vendors about a change, a good strategy is to prepare the same new terms across the board. Explain to vendors that you are instituting a new policy and ask them to explain why they should be exempt, rather than appearing to single them out.
Have this conversation with the right people.
Your point of contact with the vendor may not be in charge of deciding payment terms, and may stonewall you—or worse, make promises that the company can't or doesn't keep. Ask to speak to whomever is in charge of payment solutions and repayment terms. Depending on the size of the vendors, it may even be their CFO or COO.
Make your offer mutually beneficial.
Some vendors may not see the point in changing your payment terms. It's worked for them fine so far, and giving you more time to pay may further complicate their own cash-flow issues.
When you come to the table, suggest ways that more generous terms could benefit them as well. Explain how more cash flexibility may allow you increase your order volume, for example, or mention that you'd like to send peers in your industry their way if you can tell them how easy this vendor is to work with.
Don't promise anything you can't deliver, but make it clear that you'll do your best to scratch their back if they scratch yours.
Aim high, settle lower.
No matter what new terms you bring to your vendors, be reasonable—but aim high. As with all negotiations, you and your vendor will likely settle on something in between what both of you asked for. Start by asking for more than you might expect—a 60-day repayment term, up from your current 30-day term—and be content to settle on a compromise (in this case, a 45-day term). Focus on a realistic number that will still benefit your business.
Explore payment options with your business card.
A business card can be an integral part of any company's expense-management plan. Simply using a card to pay an invoice, when possible, gives you an extra month or so to pay off the debt. In some cases, you may be able to rack up rewards when you use a business card to cover expenses.
A negotiation with a vendor implies that you're happy with your relationship, but that some small tweaks could make your life easier—and make it more likely that you'll keep working with them. If you're truly unhappy with your vendor's terms, you can always look for a new one.
More often than not, your vendors will be happy to work with you to keep your business. They may have no idea that you're struggling with your cash flow. The first step, as in any good relationship, is to communicate what your business needs. The solution may be a simple as that.
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