- MENU
- HOME
- SEARCH
- WORLD
- MAIN
- AFRICA
- ASIA
- BALKANS
- EUROPE
- LATIN AMERICA
- MIDDLE EAST
- United Kingdom
- United States
- Argentina
- Australia
- Austria
- Benelux
- Brazil
- Canada
- China
- France
- Germany
- Greece
- Hungary
- India
- Indonesia
- Ireland
- Israel
- Italy
- Japan
- Korea
- Mexico
- New Zealand
- Pakistan
- Philippines
- Poland
- Russia
- South Africa
- Spain
- Taiwan
- Turkey
- USA
- BUSINESS
- WEALTH
- STOCKS
- TECH
- HEALTH
- LIFESTYLE
- ENTERTAINMENT
- SPORTS
- RSS
- iHaveNet.com: Small Business Guide
Real Small Business
One of the keys to effective cash flow management is keeping a close eye on your purchasing patterns. While many businesses focus their cash flow strategies on ways to boost receivables, supplier-related payables need to be watched just as prudently.
Follow these tips to help you control these expenses and help your business prosper:
Get the best price
It may seem obvious, but it always pays to make certain you are getting the best price from your suppliers.
Comparison-shop for commodity products where service and other value-adds are not critical. If you find lower rates, ask your entrenched suppliers if they'd be willing to match the price. Regularly review ongoing supplier contracts to be sure you're paying a competitive rate, and renegotiate deals where you're not. When looking for new suppliers, get a variety of quotes to ensure you can get the most for your money.
Maximize trade credit
If you're currently paying your suppliers in advance or COD, then you can boost your cash flow by getting vendors to extend you trade credit.
Trade credit is basically an open account arrangement where you can purchase goods or services from your suppliers without having to pay for them at the time of purchase. Think of it as kind of short-term loan with no interest due if payment is made by the bill's due date. For example, trade credit of "net 30" means you have 30 days to pay your bill. Ideally, you will want to stretch payments as far out as possible to maximize your cash flow.
The amount of trade credit your suppliers may grant you will depend on a number of factors, including the suppliers' policies, your company's credit record and your purchase history with the supplier. Treat trade credit with respect. By paying your suppliers in a timely fashion and according to their terms, you can encourage them to grant you additional credit in the future while avoiding costly interest charges.
Ask for early payment discounts
If your suppliers are currently granting you trade credit, you may be able to request a discount for early payment.
For example, credit terms of "2% 10 days, net 30 days" means you receive a 2% discount if payment is made within 10 days, with the net due in 30 days. Taking advantage of such a discount is the equivalent of getting a 24% return on your money. Some suppliers offer early payment discounts as a matter of course. If yours do not, ask for it. They may be willing to provide the incentive as a way to speed up their own receivables.
Don't overbuy
Keep a close eye on your procurement needs, and, when possible, space out your purchasing to avoid tying up funds in non-income producing assets.
This is particularly crucial if your business carries significant inventory, which can tie up financial assets. Be sure to track how quickly it turns over. Slow turning inventory can be a sign that you're overstocking, thereby hampering your cash flow.
Keep an eye out for deals...but be careful
When possible, take advantage of special deals and other incentives offered by your suppliers.
For example, some vendors may reduce prices at the end of a product's life cycle to move excess inventory, or may have special introductory rates when a new line is added. On the other hand, don't get swept up in deals. Buying items in bulk to qualify for volume discounts may save you money, but you may also find yourself straining your cash flow with funds tied up in items you won't be using for several months.
Check out these articles intended to help you out with your business purchases:
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Your Own Business - Managing Purchasing to Maximize Cash Flow
Article: Copyright ©. All rights reserved.