You want to exceed customer expectations with credit terms, but you also need to keep on the good side of suppliers to ensure the best deals and maintain healthy relationships. However, to balance both means you need a healthy cash flow. The only way to ensure you have good cash flow is by having a fantastic working capital cycle.
So, what can your business do to improve supplier payment terms and supplier credit terms to create a happy supply chain and a better working capital cycle?
1. Manage your inventory
It is vital to ensure you have products ready to go when it comes to sale but overstocking your
inventory means that you are paying for the space and unsold goods. Instead, keep your stock lean
and try not to over order so that items are not left on warehouse shelves. Furthermore, by buying
less in, you have less to pay to your suppliers. This will contribute to your overall working capital.
2. Resolves disputes quickly
Disputes take up valuable time and cost that businesses do not have. Furthermore, conflicts that
drag on can even result in legal cases which can be astronomically expensive especially for small
businesses. By resolving disputes quickly, whether between customers or suppliers, you reduce the
cost that could incur through delays. It is often best to put a course of action in place quickly,
allowing everybody to move on.
3. Streamline expenses
It is always good to review your business costs and work out where any unnecessary expense is
going in order to improve you working capital. It may be worthwhile reviewing prices with suppliers or switching suppliers if you notice a better deal. Similarly, it may be more cost effective to buy a product or service outright instead of
through a rental or service agreement or vice versa.
4. Check for discounts
Suppliers may offer discounts for quick repayment which can save your business a significant
amount of money. You may think that with the state of your cash flow you are not in a position to do
that. However, by using Supplier Finance, your provider can pay your suppliers instantly, and you can
pay back the provider when your clients pay you. This way you don’t have to renegotiate supplier
payment terms or supplier credit terms.
5. Outsource accounts receivable
It can be costly to chase up clients and invoices to make sure you receive payment. Furthermore, it
can take a huge amount of time which could be better spent growing your business with profit-
making activities. Fortunately, outsourcing can be really easy and flexible. For example, GapCap
offers Selective Invoice Finance. This releases up to 85% of funds from your debtors as soon as you
invoice. Once the debtor pays GapCap, you can receive the rest of the payment minus a small
6. Clear loans
If it is possible, then try to clear loans that have a high-interest rate that is costing you more through
future instalments and interest. If you cannot clear these high-interest loans, look to transfer to loan
to a fixed rate so you know what to expect each month which can help to stabilise your cash flow.
Does your working capital cycle need a boost?
If your working capital needs a boost, then Flexible Invoice Discounting can help. If you want to
release funds from the money you are owed before the supplier payment terms, then load your
invoices to GapCap’s secure platform. You can then drawdown from the money you are owed. This
helps to bridge any gaps between paying suppliers and receiving payments from clients.