If your suppliers offer you goods or services on credit, this will have a beneficial impact on your cashflow. You will have had the benefit of using the goods or services supplied, and the funds to pay for them, initially, stay in your bank account.

This benefit can be multiplied if you are able to convert the supplies into cash sales as you could possibly have the funds to pay created by this revenue. In this way your purchases are self-financing.

So, why would you pay these bills early?

Here are a number of options you could consider:

  • Would suppliers offer increased trade or cash discounts for early settlement or cash with order?
  • Would the goodwill created by settling supplier invoices early mean you could receive priority delivery?
  • Good news is hard to come by. Perhaps your suppliers could offer testimonials or promote your business in some way to its other customers?
  • You would grow your list of suppliers willing to offer trade references.

What you would definitely receive is their attention. If you have a reputation as a customer that pays their bills early, suppliers will sit up and take notice. If you can factor in some of the possible benefits to your business as listed above these should have a positive impact on your profits.

Its all in the planning. Consider the cashflow and impacts on profits. During the present disruption cashflow considerations may have the upper hand, but if the situation eases, paying early to gain profit wins could be attractive. 

Source: Other Tue, 12 May 2020 05:00:00 +0100