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Do you need to improve your company's cash flow? Do you want to free up cash to pay off debts or even expand your operations? One of the most effective ways to improve your cash flow is to extend your supplier payment terms .
With increasing financial pressure on businesses worldwide due to the Covid-19 situation, there is an imminent need for organizations to renegotiate payment terms with their suppliers .
It turns out that when a financial crisis hits, it may be too late to get suppliers to accept late payments and preserve positive cash flow. Organizations can prepare for this eventuality by initiating the negotiation process to obtain better payment terms.
Here we will highlight how this impacts any business, especially in retail, and offer tips you can follow to improve your supplier payment flow.
How does paying suppliers impact your business's cash flow?
Adding time to your payment schedule is equivalent to obtaining a short-term loan: you can keep the money internally while continuing to collect revenue . This gives your company the ability to use its money in ways that can increase its financial results.
Remember that suppliers are partners, so the negotiation is more likely to succeed and prevent cash flow problems. They value your business, especially if you have a good relationship with them, which means they will probably take your request into consideration.
The great advantage of good management and improved supplier terms is that it's a way to improve your cash flow without harming your credit . Don't hesitate to choose this path the next time you're in a crisis.
With careful analysis and renegotiation of payment terms, organizations can plan well and ensure the preservation of working capital. Transparent and respectful communication with the supplier regarding payment conditions will help maintain healthy, long-term relationships.
Supplier payments: 3 tips for negotiating a new deadline
But how do you do this in practice? If you've never asked your suppliers for better payment terms, you might think it's unlikely you'll succeed. Of course, you may only have one chance with this, and in that case, it's important to be careful with your strategy.
That's precisely why we've put together 3 practical tips to help you successfully renegotiate .
1. Make a proposal that is positive for both sides
If you have a great relationship with the supplier, you already have an advantage in renegotiating your deadlines. But in practice, you'll have a much better chance of success if you offer something positive in return , something that benefits them as well.
Think about what you could offer in exchange for a longer payment term:
- the cash flow allow you to increase your sales, thereby increasing the supplier's order volume in the next purchase?
- Will you use this money to create promotions or lower margins, which help reduce prices and increase sales flow?
Frame your proposal in a way that makes sense to both sides.
2. Talk to the right people
When it comes to payment terms, your salesperson is probably not the right person to ask. Therefore, it's important to ask your contact who is responsible for deciding payment terms and speak directly with that person .
It will likely be the company's sales manager or perhaps even the head of finance. They will know the company's numbers, its cash flow situation, and will be in a better position to seriously consider your request.
Remember that building and maintaining a friendly relationship with your supplier is one of the most effective "tools" when negotiating better payment terms. Furthermore, trust is also important to ensure a good relationship with your suppliers .
3. Rely on technology to optimize the process
If one of the levers that companies can use to alleviate cash flow problems is to negotiate better payment terms with their suppliers, it is necessary to first have a solid information base that presents the entire flow of accounts payable with expected amounts and due dates, isn't it?
This alone positions technology as one of the essential elements for renegotiating supplier payments . With tools like ERP , it's possible to look to the future, make projections, and identify when, at a certain point, it may not be possible to meet all payment obligations.
How can you safeguard your company's financial health?
Everything we've seen so far relates directly to supplier payments and securing good renegotiations. But in the current context, it's necessary to go further and safeguard your company's financial health .
This involves a series of actions that, in the medium and long term, will make your organization prosper financially.
Below, we've outlined two key points that will show you how to take care of your financial health from now on.
Rely on automation for the accounts payable department
When considering the type of innovation that needs to be implemented, we need to highlight the existing demands in the financial sector related to the digitization and automation of banking processes.
The absence of automated processes that allow access to up-to-date information, such as an overview of all invoices with expected payment dates and applied discounts, directly impacts business productivity, which ends up wasting a lot of time on excessive phone calls and email responses.
Without this automatically updated data, there is a risk of financial debts arising that could have been easily avoided with a less bureaucratic process .
By using Skyone Marketplace , a financial services platform from Skyone , you simplify the day-to-day operations of your accounts payable department, optimizing your team's resources, while your suppliers gain access to information that streamlines the reconciliation process.
These are some of the benefits your organization will gain from using this solution:
- Platform for viewing invoices due for your suppliers;
- Automatic import of accounts payable from your retail ERP system;
- Concentrating title information on the same screen;
- Full statement with flexible filters to facilitate daily reconciliations;
- Alerts for new titles or changes to existing titles;
- Everything is 100% digital and without bureaucracy.
Use receivables financing
Accounts receivable financing occurs when a company has a series of amounts to receive in the future, mainly from installment sales and promissory notes, and requests this money in advance to increase the liquidity of its cash flow. The goal is, again, to promote good financial health for the company.
In this way, the finance department can anticipate future receipts and obtain advances on receivables as a form of financing, to invest or pay other debts and expenses, all based on the projected value.
With Skyone Marketplace, your company can:
- Full control over the securities that are released for early repayment;
- Through the Supplier Portal, automate the early payment of receivables to your suppliers, with super competitive rates, even for the smallest ones;
- Credit to the supplier's account within 6 business hours.
Now that you know everything about the negotiations involving supplier payments, it's time to start your digital transformation!
