Many businesses – particularly those that are not very large – have found that the actions of their suppliers will often have a huge impact on their business. Sometimes that impact will be positive and other times it will be negative, but even small changes along the supply chain like a price hike or change of payment terms will have a knock-on effect that hits your business too.
It is easy to forget just how important your suppliers are to your business being a success until something goes wrong with them and throws your best laid plans into disarray. In some cases the solution is fairly simple, if they put prices up suddenly and mess with your profit margin you could just get a new supplier – it is a free market after all.
But in reality many firms are inextricably linked with their supplier, for example they might be the only ones who know how to make your product and therefore would be able to achieve a significant cost advantage over any other supplier. If this is the case, you will be stuck with them for time being and have to overcome any problems they send your way.
The most common complaint that businesses will usually have about suppliers is that they all have different payment terms and processes, making it difficult to keep track of who needs to be paid and when. Some suppliers will have different reactions to late payment – with some that are content to continue providing you with the products or services they offer and others who will cut you off straight away.
So what can your business do on your end to try and make sure that inconsiderate suppliers do not unintentionally “kill” your business by messing up your cashflow or cutting off an essential service?
The first piece of advice is essential – you need to make sure that you understand your payment process inside out. Invoice processing is something that requires a set procedure rather than being done “off the cuff” differently each time. With a procedure in place you should be able to manage your outgoing payments much more quickly.
You will also need to get a handle on which suppliers are essential to be paid immediately within their terms and which can be stretched out a little. In an ideal world your business would pay all of its suppliers on time, but this simply is not realistic for the majority of small enterprises. Just be sensible about it – if your electricity will be cut off because you haven’t paid within the specified term and as a result you can’t work, you are probably going to end up costing your business more.
Perhaps most importantly you need to stop dealing with incoming invoices manually and switch to a more automated system. Depending on your specific business needs, you might need Accounting Software or perhaps Invoicing Software to start managing them in the cloud and improve your process. Speak to one of our support team to see which is best for your business requirements.