Building healthy supplier relationships isn’t just about strengthening your supply chain. It’s an investment in your business. Thankfully, cultivating and maintaining them is easier than you might think. Let’s take a quick look at what makes supplier relationships so valuable and how you can fortify your own.
Building Strong Relationships with Suppliers Will Strengthen Your Business
What happens within your supplier relationship doesn’t stay isolated in the relationship. It seeps into every aspect of your business. When you have a good relationship with vendors, you’ll:
- Qualify for preferred client discounts to reduce costs.
- Have a partner that’s more understanding, forgiving and flexible if you need extended payment terms.
- Build trust and increase your creditworthiness with vendors, so you can place larger orders or purchase more often as your business scales.
- Futureproof your supply chain because your vendors will want to continue doing business with you.
- Increase delivery speeds, which can help you get your offerings to market faster and give your business a competitive advantage.
- Reduce and slow cash outflows, so you have more working capital.
- Have more agility and be able to pivot as needed because you have more working capital.
- Be less likely to rack up charges on credit cards or require a business loan or line of credit.
Tips for Maintaining Healthy Supplier Relationships
Clearly, negotiating good terms is important for buyers, but you can’t come to the negotiation table empty-handed. You’ll need to build and maintain healthy supplier relationships to ensure your business is one that vendors want to negotiate with. These basic tips will help.
Pay on Time
One of the best practices in supplier relationship management is ensuring each transaction is paid within the required timeframe. If the supplier offers discounts or other incentives for early payment, take them up on it as often as possible. Your reliability in this department speaks volumes on how much you value their services and respect what they’re offering.
Get to Know Them
When you’re vetting new suppliers, take time to get to know them. Find out what their internal structures are like, who you should contact for what, and what motivates them. If possible, check out their facilities too. That way, you’ll better understand where they’re coming from as the relationship develops.
Treat Suppliers Like They’re Part of Your Team
Your vendors are the backbone of your business and can provide insights you won’t find anywhere else. So give them the respect they deserve and focus on your mutual business success as much as possible. This is one of the best ways to retain suppliers and build long-term business relationships.
While chats on delivery day are good, they’re not necessarily the type that will build stronger supplier relationships. Instead, you need to zero in on three areas.
Early and Frequent Communication
Right out of the gate, it’s important to get on the same page with your suppliers and develop a collaborative relationship through frequent interactions. Find out what their business needs and how you can help. Let them know what you’re trying to accomplish and see how they can help—touch base on these goals regularly. If your supplier knows you’re going to bat for them by sending them new business or giving them bragging rights, it’s going to foster a solid relationship faster.
Honesty is an integral part of open communication. Keep your suppliers updated about what’s happening on your end. For example, if you’re planning a new product launch, changing designs, running a sale, or expecting a seasonal lull, be sure to let them know so that they can adapt to your changing needs along with you.
You and your supplies have limited time, plus unclear language paves the way for misunderstandings. Instead, be direct about your wants and needs and be open to feedback and solutions that might not be what you expected. Your suppliers just might surprise you with alternatives you haven’t considered if you give them the opportunity.
It’s often said that a product can be any two of the three: fast, cheap, or good, but never all three. While there may well be exceptions to the rule, it generally holds true. Consider which of the two your vendors are going for and hold them accountable in these areas, but also know that there will be difficulties even within their strengths at times. For example, if a vendor promises next-day delivery every time but starts to miss the mark and deliver later, it’s within your rights to request a discount for late deliveries or some other type of compensation. At the same time, if your vendor is offering rock-bottom pricing, don’t expect them to deliver premium goods. You’ll soon become the unpleasable buyer.
Invoice Factoring Turns Your Accounts Receivables into Cash
Think of receivable factoring as an accelerated solution to your cash flow problems. When you work with a third party known as a factoring company, you can get a cash advance on your unpaid invoices.
Let’s say, for example, you need immediate cash for expenses like inventory or payroll. You simply take one or more outstanding invoices and submit them to the factoring company. They then give you a percentage of the invoice amount upfront, which you can spend however you wish, and they handle the payment collection for you. When your client pays, the factoring company sends you any remaining money owed minus a nominal factor’s fee.
This arrangement works well for many small and even startup businesses because there are less stringent requirements than business lenders. In addition, concerns like credit and collateral are not an issue as they might be with a traditional financing option because the invoice itself serves as collateral and your client is ultimately the one responsible for paying the invoice.
Factoring Can Help Strengthen Supplier Relationships Too
When it comes to supplier relationships, factoring can help on two fronts. First, it can alleviate strain. When a small business has a period of rapid growth, their supplier needs increase too, but sometimes vendors aren’t ready to increase credit in alignment with the new needs. Factoring provides the cash required for supplies, so the relationship isn’t impacted by momentary conditions. Secondly, factoring can provide cash as needed to ensure vendor payments are made on time. A good payment history shows vendors that buyers are reliable, so they’re more likely to extend good payment terms and increase credit.
Get a Free Factoring Quote from Charter Capital
If you haven’t developed strong supplier relationships yet or your growth is outpacing your creditworthiness with vendors, invoice factoring can help. To learn more or get started, request a free rate quote from Charter Capital.
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