60-90 days to get paid? Don’t panic, you got this. Last time round we discussed how to manage your big corporate customer’s systems to minimise the pain. Now what can you do with your suppliers?
The goal is to minimise the time gap between your outgoings and that payment arriving.
First things first; get to grips with your cashflow. Work it and plan it like your business life depends on it. Because it does. Have a proper meeting with your accountant to get it set up and then update it daily yourself. Yeap, every day. Those first few months will be critical and you need to know where every pound will be and when.
Next, just be honest with your suppliers. Really honest. For a moment think how you feel when you get lied to, or a limited version of the “truth” is spun when you’re trying to get paid. Do you ever trust them again? Ignore the temptation to do the same.
Whilst those first 2-3 months waiting for your money can seem like an eternity, the reality is that this is only a temporary cash flow situation. You are going to need those suppliers long term so by being honest with them you’re building on the relationship you already have.
Growth in your business is good news for their business. Tell them who it is and what it means for you. Once they understand and are confident that your money is in the pipeline as is theirs, you’ll likely find that they become more relaxed. I’ve found over the years that the majority of credit controllers are actually quite reasonable.
Sadly, whilst they are unlikely to extend their terms to match your customer’s, the more you can maximise their goodwill the smoother your problem. But remember the honesty. If you agree a later payment date with them, stick to it whatever it takes.
See, if they agreed to help you out and then you don’t honour your part, guess what will happen to the next invoice’s due date.
Once you prove yourself good to your word, most suppliers will be happy to permanently extend their terms for you. Even if it’s only by a week or 2 it can make all the difference.
A word of caution if you’re buying from a large national supplier. Some companies regularly supply their debtors list to credit rating firms such as Experian. So even if your supplier agreed to let you pay later than usual, when that list is sent off it shows your company is X number of days late paying. This can affect your credit score, which others will be using, defeating the object of this plan. If you suspect this is possible ask them and then reconsider how you prioritise your payments.
Be as open and honest as you can with all of your suppliers, stick to your word and they will want work with you.
If you’re in with the big boys more will follow and this temporary situation will seem like a lifetime ago!