Welcome to part three of our series Optimizing Cash Flow in Small Business. I’m David Worrell from FUSE Financial Partners. I’ve got some tips for you today to help you manage your vendors by preparing, practicing and partnering with them. This will help move your cash flow in the right direction.
Let’s get right into it.
Prepare to do business with your vendors by putting a credit application together. You want to give them a whole credit package. You are asking them for credit. That package should include things like your W-9, sales tax exemption form, and references and bank accounts. References are other vendors who have given you credit, who can attest to how well you pay. Include your bank account information, in case they need to check it. You might also work with the vendor up front to get their ACH information, so that you can send them money to make payments. Anything that’ll make their life easier to both approve your credit and to receive your money.
Preparing also means looking at what they see from the outside. Go to Dun & Bradstreet and check your credit record. If you see things you don’t like, they have a way that you can reply to negative comments. You can write back to explain the circumstances or contest negative comments. Please check out Dun & Bradstreet to find out what they know about you.
Have a document about your payment policies to share with your new vendor. If you always pay in 60 days, as Target does, be upfront about that. Tell them in advance with a policy document, so they can decide whether to do business with you.
Finally, when you are established with a vendor, continue to communicate all the time. Say thank you for the shipment, it arrived perfectly. Communicate when the invoice arrives to say you’ve got it. Call them and tell them when the payment is scheduled. Call to make sure they receive the payment. Those things are going to build a relationship between you and the accounts receivable department and probably even the higher-ups at that business.
This will be very important for our last step. Learning to partner with your vendors by asking them for more. Begin asking them for longer and longer terms, higher and higher credit limits. You are going to rely on them as you grow, if you ask them those questions without communicating, they’re going to think that you’re trying to pull one over on them. That’s not the point. Explain to them how you are growing and how they can grow right along with you. Of course, that takes a partnership. If they will come along with you, then you’re going to send them a lot more business to fuel your growth.
That’s how to manage your vendors to make your cash flow go in the right direction.
Join us again later for more tips about how to optimize your cash flow I’m David Worrell from FUSE Financial Partners.
Thanks for joining.