When you run a business, your suppliers are essential. But occasionally, you may not have enough money to pay your suppliers. Luckily, there are ways how you can negotiate with suppliers for extra time to pay.
When you owe money, it can be tempting to hide, but you should avoid that. To preserve the future relationship with your suppliers, let them know you can’t afford to pay right now and you just need a bit more time. If you have a large deal in the works and you’re likely to have the funds soon, let your supplier know and reassure them you will pay as soon as you receive the funds. Give them reasons why this situation isn’t likely to occur in the future.
Ask for a Payment Plan
Your supplier sees you as a customer and they probably want to keep your business. If you’re sure you can stay current on future payments, your supplier may be willing to let you split up your current invoice into manageable chunks to be paid over time. As a sign of good faith, you may want to offer your supplier some money up front. Even if the payment is a fraction of what you owe, this gesture shows the supplier you’re serious about paying your bill.
Prepare for Interest and Fees
When you’re making a late payment, be aware you may incur late fees and interest. If your supplier assesses these amounts, don’t act surprised or try to avoid making these payments. Instead, pay them willingly. Fees and interest help your supplier to cover the costs associated with late bills. Keep in mind that if they don’t get their payments, they may not be able to pay their utility bills, leasing costs, payroll, and other expenses.
Explore Credit Solutions
To avoid this situation in the future, you may want to secure a line of credit or a corporate credit card. When your working capital (cash on hand) is low, you can use the line of credit to pay your suppliers. Then, when you get a boost in revenue, you can repay the line of credit. Some suppliers may also offer extended credit terms, but always make sure to find out about interest and fees associated with the bill. To ensure you’re getting the best deal possible, you may want to compare multiple credit offers from suppliers, banks, credit card companies, and alternative lenders.
Track Cash Flow
That said, you need to be extremely careful when taking out credit. If you max out your lines of credit and don’t have enough money to repay them, you may not be able to buy your necessary supplies, and that could hurt your business. To sidestep the credit trap, consider using cloud-based accounting software such as QuickBooks to track your business income and expenses, then generate cash flow reports.These reports track how money is flowing into and out of your business, and it helps you project when you’re most likely to have cash on hand. It also helps you decide whether you can afford supplies before you order.
Maintaining a positive relationship with suppliers is essential. You want your suppliers to trust you and be able to rely on you for prompt payment. In the rare situations where you need a bit of extra time, simply be open with your suppliers, explain the situation, and offer some solutions. Then, use tools to avoid this scenario in the future.