Many businesses are of the size and scale where they do not have their own dedicated internal procurement expertise. Sadly, the result is often costly, with contracts that are firmly in the favour of the suppliers and you - the customer - being none the wiser.
This is an area that is too often overlooked but one where significant savings can be made. You can start by asking a few simple questions.
How quickly do you pay your suppliers and partners?
Is your accounts department paying quicker than they need to?
Could payment terms be increased so the cash sits with you longer?
A little focus and adjusting of your terms here can lead to much better cash flow within your business where it can work for you instead of for your suppliers.
The impact of increasing creditor days
Increasing your creditor days helps maintain your cash reserves whilst also allowing your capital to work for you (potentially a number of times over) before your invoice is due to be paid. If managed well, you are able to almost leverage your supply chain as a form of short-term financing (check with your CFO or financial expert for more details).
Don’t be blinded by discounts
Many companies are “negotiating” with their suppliers and often walk away thinking that they have negotiated a great deal, l as they managed to achieve a price discount. However, it is much more than the discount and more often than not, the payment terms are far from optimal.
Each business needs to look carefully at the terms and conditions of each contract and perform its own unique calculations to ensure the best deal possible.
Sometimes paying a slightly higher price with better payment terms is a much better outcome for your business in the long term.
Check with your finance team to help you work this out.
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Intercor works with large-scale clients who wish to transform and optimise their businesses for growth and value creation. A combination of our cost optimisation services and tech-enabled business design solutions yields outstanding results. Book a call with us to talk through the opportunities.
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