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Do you need to improve your company's cash flow? Want to free up cash to pay off debt or even expand your operations? One of the most effective ways to improve your flow is to lengthen your vendor payment terms .
With increasing financial pressure on companies 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 beginning the negotiation process to obtain better payment terms.
Here we will highlight how this impacts any business, especially in retail, and 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 the equivalent of getting a short-term loan: you get to keep the money in-house while you continue to collect income . This gives your business the ability to use your money in ways that can boost your bottom line.
Remember that suppliers are partners and therefore negotiation has everything to work out, in addition to preventing cash flow problems. They value your business, especially if you have a good relationship with them, which means they are likely to consider your request.
The great advantage of good management and improving supplier terms is that this is a way to improve your cash flow without damaging your credit . Be sure to opt for this route the next time you are in a crisis.
With careful analysis and renegotiation of payment terms, organizations can plan well and ensure working capital conservation. Transparent and respectful communication with the supplier about payment terms will help maintain healthy, long-term relationships.
Paying suppliers: 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 may find it unlikely to succeed. Of course you can only have one chance with this, in which case it's important to be careful with your strategy.
That's precisely why we've separated 3 practical tips so you can do this renegotiation .
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're much more likely to succeed if you offer something positive in return , which is beneficial to them as well.
Think about what you could offer for a longer payment term:
- the cash flow allow you to increase your sales, thus increasing the supplier's order volume on the next purchase?
- Will you use that money to create promotions or lower margins, which help lower prices and increase sales flow?
Frame your proposal in a way that makes sense for both sides.
2. Talk to the right people
When it comes to payment terms, your salesperson is probably not the right person. That's why it's important to ask your contact who is responsible for deciding payment terms and talk to that person directly .
It will likely be the company's sales manager or perhaps even the head of finance. They will know the company's numbers, the cash situation and will be in the best position to seriously consider your application.
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. Count on technology to optimize the process
If one of the levers that companies can employ to alleviate cash flow problems is to negotiate better payment terms with their suppliers, it is first necessary to have a solid base of information that presents the entire flow of accounts payable with amounts and expected maturities , Is not it?
This alone places technology as one of the essential items for renegotiating supplier payments . With tools like ERP it is possible to look into the future, make a projection and identify that at a certain point it is not possible to cover all the payments.
How to ensure the financial health of your company?
Everything we've seen so far are actions that are directly related to the payment of suppliers and actions to achieve a good renegotiation. But in the context we live in, it is necessary to go further and ensure the financial health of your company .
This goes through a sum of actions that, in the medium and long term, will make your organization prosper financially.
Below we have separated two points that show the way to ensure your financial health from now on.
Count on the automation of the accounts payable sector
When we think about the type of innovation that needs to be implemented, we need to highlight the existing demands in the financial area related to the digitalization and automation of banking processes.
The absence of automated processes, which allow access to up-to-date information, such as, for example, an overview of all securities with expected payment dates and applied discounts, directly impacts business productivity, which ends up wasting a lot of time with excessive 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 .
With Skyone Marketplace , a financial services platform from Skyone , you can simplify the day-to-day operations of the accounts payable sector, optimizing your team's resources, while your suppliers have access to information that allows you to simplify the reconciliation process.
These are some of the benefits for your organization by relying on this solution:
- Platform for querying the titles to expire for its suppliers;
- Automatic import of accounts payable from your Retail ERP;
- Concentration of title information on the same screen;
- Complete statement with flexible filters to facilitate daily reconciliations;
- Alerts for new titles or changes to existing titles;
- All 100% digital and without bureaucracy.
Use prepayment of receivables
The anticipation of receivables happens when a company has a series of amounts to receive in the future, mainly coming from installment sales and trade notes, and requests this money in advance to increase its cash liquidity. The objective is, again, to promote good financial health for the company.
In this way, the financial area can anticipate future receipts and obtain advances on receipts as a form of financing, to invest or pay other debts and expenses, all based on the estimated amount.
With Skyone Marketplace, your company can:
- Full control over the titles that are released for anticipation;
- Through the Suppliers Portal, automate the prepayment of receivables to your suppliers, with super competitive rates, even for the smallest;
- Account credit to the supplier within 6 business hours.
Now that you know everything about negotiations involving supplier payments, it's time to start your digital transformation!
