When youâ€™re starting a new business, you will want to pay special attention to any advice that teaches you how to keep more cash in your commercial business bank account. An often-overlooked means to drive a new business towards this goal is achieving favorable payment terms with suppliers.
Though new businesses wonâ€™t buy in volume like established companies do, they can still employ tactics to get discounts and improved service, especially when targeting a new set of customers or buying a product that is new in the market. You may not get the discount percentage you desire, but you wonâ€™t get anything if you donâ€™t make an effort.
To help this process, here are a few measures you could take to get the most competitive prices from your suppliers:
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Build a strong relationship
New business owners should work towards establishing a strong relationship with suppliers â€“ this is the key to getting them to work with you when you ask for a discount. But donâ€™t make frequent requests; save those discount requests for when you really need a low price â€“ if you ask for one in every scheduled supply, it may damage the relationship.
How to build a strong relationship? Try to treat suppliers like you do your customers. Conduct face-to-face meetings with them when possible. Donâ€™t shy away from inviting them to company events, or from discussing product launch ideas.
Make timely payments
This is usual with most suppliers: when they see someone paying on time, and regularly, they will go way and beyond to make them happy. Make sure your accounts department properly organizes supplier invoices so that everyone gets paid on time.
Businesses, however, can face barriers in capturing discounts due to decentralized invoice receipts, the manual and time-consuming routing of invoices, and slow approval times. ADP.com says that automating the invoice receipt with electronic invoicing can go a long way in accelerating the payment and invoice processing lifecycle. And this helps to capture early payment discounts, which means a more robust company bottom line.
Avoid purchase-volume promises
Instead of making a promise to buy a specific volume of products or services, give suppliers an idea of how much you are going to buy in the first year, or how much do you plan to spend on a specific product category in a particular year.
Once there is a commitment, you may lose negotiating power. So avoid making purchase volume-promises that you may not be able to commit to and give suppliers a heads up on specific volumes. You may also end up receiving new-customer discounts this way.
Where possible, use multiple suppliers
Using multiple suppliers can keep all supplier’s pencil-sharp. Each supplier will know they will be competing for your business. Ask for quotes from two or three suppliers, which will expand the pool of options. If one of them doesnâ€™t quote a favorable price, you can ask a peer for a quote from the same supplier, or take up the second option and compare quotes.
Suppliers might also be willing to give discounts if they wonâ€™t have to pick up extra materials or deliver at your company site multiple times. Get to know how you can lower delivery costs, and figure out ways to avoid wasting supplier resources.
Discover mutual areas of benefit
Instead of thinking as a new business owner, think like a supplier when you want a discount. They have the product or service they want to sell as much as possible. Present your business as a company with a high potential of selling to the target market. Understand that sales talk, and a supplier that sees good potential will likely give you a discount.
Spend time to analyze the goal of your suppliers and align some of your business operations towards achieving that goal. If your supplier wonâ€™t budge on a few products, check if there is a discount available if you buy a larger quantity.
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