Cash is King right now and it is vital that businesses of any size do as much as they can to help manage their cashflow as they return to their new ‘normal’.
Just Cashflow have pulled together a series of short blogs to help you and your business with the ups and downs of cashflow management.
This blog deals with re-negotiating payment terms. An uncomfortable subject for many SME owners however, in these times it is vital that every avenue of cashflow management is looked at and if having an extra period to pay a debt will help your business then it is a vital undertaking.
How to go about it
This of course could be a difficult conversation to have. Businesses up and down the land are in the same position as you are. Everyone is looking for ways to help sustain their business until a level of normality returns.
Approaching your suppliers to discuss can seem daunting, however if you are prepared and honest about your situation you will generally be able to have constructive and hopefully positive conversations which will result in the outcome that you envisioned.
In a recent survey undertaken by Bottomline Technologies, 64% of UK businesses of all sizes are now more willing to re-negotiate payments terms in light of COVID-19. So, this isn’t going to be the first or last conversation you or your suppliers will be having on this subject.
Which suppliers should you speak to first?
Don’t try to speak to each and every supplier in one go. This will take up a lot of your time and become a dreaded task. Take the time to review your suppliers list and who and how many of your suppliers you will speak to on a daily or weekly basis.
Compromise is key
Look to be prepared to have differing areas you are willing to re-negotiate. Is it price, delivery terms, payment terms? Be prepared to discuss any aspect of the terms of your contract.
In some cases, suppliers may be open to provide discounts on payments that are made ahead of the agreed dates.
If you are looking to increase your normal 45-day terms to 90 days, you may end up compromising on 60 days instead.
Honesty is the best policy
Explain that you are looking to improve your cash flow and reassure the person on the other end of the phone that you are not in financial difficulties. Indeed, you could point out that should any agreement come to pass; you may be able to spend more with them in the future.
Understand their position
Make sure you understand your supplier’s business sector – what are the challenges they are facing?
Knowing and understanding their position will not only flatter your supplier but could help you identify ways in which you could help them for longer payment terms.
Re-negotiating payment terms may seem daunting in the short-term, but the long-term benefits will hopefully provide you and your business with the dividends.