How lucrative can negotiation with your suppliers be?
The art of negotiation with your suppliers can produce better terms and prices, thus fostering more working capital for your business, stronger strategic relationships and a competitive edge.
Talk to your banking and operational partners to identify areas of flexibility. Think in terms of:
Time: Strive for the shortest term for receivables and the longest term for payables. Stretch the cycle.
Money: Strive for favorable interest rates on working capital and any rates you incur to bridge gaps between payables and receivables.
Processes: Implement electronic data interchange, automatic transfers, and speed of such transfer.
Identify Areas of Opportunity
Negotiation is about asking the right questions to source common areas of improvement for you and your supplier. Here are potential areas of opportunity:
Information Sharing: Do you have business goals or target markets in common?
Order fulfillment: Can you consolidate orders or guarantee volume to save time and money on delivery?
Integration: Are there inventory systems you can integrate to stay abreast of orders and increase efficiency?
Realizing the Benefits
Once you find areas of mutual benefit, point out where your supplier can help by passing those savings on to you in the form of reduced rates, longer pay cycle or another mutually beneficially perk.
The views expressed by the author are not necessarily those of Fifth Third Bank and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank.