Why now is the best time to invest in your suppliers
How often do you find yourself holding onto your cash in the bank in the hopes of generating interest? We daresay this is the majority of private enterprises. No matter how long you delay paying off your expenses you still need to uphold your end of the deal. We believe now is the time to be investing your cash into partnerships that will help your business performance in the long run.
Take back control of your business management and develop a systematic approach to understand where you should be cutting costs and where you should be ramping up spend.
While it may not seem like the logical move right now, given the unpredictable economic environment, we see now as the opportune time to get the cash out of the bank and start paying off your debt – starting with your suppliers.
Efficacy is at the centre of all business strategies and the build and maintenance of the mutually beneficial relationships with your suppliers can put you in a better bargaining position to negotiate better deals for your business. If you can use your excess cash to better your supply chain this could see you generate deals that will benefit your business tenfold. The better deals you have, the more profitable your business will be due to the reduced cost of doing business.
Most businesses are in the same boat right now, needing to hold onto the mutually beneficial relationships they have on the books. By maximising the long-term value of the partnership, you are investing in greater value to your operations. A thriving operation allows you to keep your stakeholders happy, employees employed, customers satisfied while opening the door for you to invest time or money in other aspects of your operations that add equity to your enterprise.
Where you may generate just a few percentage points of interest on your money while in the bank, a 5% or 10% discount from a supplier immediately makes this strategy a worthwhile option from a purely financial perspective. But where real value is generated is in the strengthening of lasting relationships with your suppliers and the benefits that come with longevity.
A prime example of this working involved one of our clients, who was competing against four or five other players in the industry, who are known for paying their suppliers slowly.
We worked with him to help him pay his suppliers earlier and quicker and this allowed him to negotiate better deals for his business. His suppliers trusted him, and this trust has led him to become an industry leader.
You may be asking what the first steps should be. Take a look at your stock and materials and understand how you can move these. We suggest reaching out to your supplier’s sales or accounts team and see how you can pay off your debt quicker and negotiate a better deal.
If you want to take control of your business management and performance so you are generating equity in your business, reach out to the CFO Dynamics team today!