Supply Chain Finance: learn all about this concept!
July 20, 2022
February 2022 | by Amplifica Digital
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 vendors to accept late payments and 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 tips you can follow to improve your supplier payment flow.
Retail supplier management: why is it so important?
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 big advantage of doing good management and improving supplier terms is that this is a way to improve your cash flow without damaging your credit . Be sure to choose this path 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.
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 .
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:
Frame your proposal in a way that makes sense for both sides.
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. In addition, trust is also important to ensure a good relationship with your suppliers.
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?
That alone makes technology one of the essential items for renegotiating supplier payments . With tools such as ERP, it is possible to look into the future, make a projection and identify that at a certain point it is not possible to pay all the payments.
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 separate two points that show the way to ensure financial health from now on.
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 .
By relying on Sky.Simple , a financial services platform from Sky.One , you simplify the day-to-day activities of the accounts payable sector, optimizing your team's resources, while your suppliers have access to information that allows you to simplify the process of conciliation.
These are some of the benefits for your organization by relying on this solution:
To learn more, enjoy watching the video below!
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 Sky.Simple , your company can:
Now that you know everything about negotiations involving supplier payments, it's time to start your digital transformation!
The first step is here: simplify the day to day of your accounts payable sector with Sky.Simple !
This content was produced by SkyOne's team of cloud and digital transformation experts.