Business Start-Ups magazine, May 1998
Problem: You believe you could improve your cash flow if your vendors lowered their prices.
Solution: Don't forget, your vendors have businesses to run, too. There are a couple of different financing methods that might induce your vendors to lower their prices for you or to help you improve your cash flow. Here are some ideas:
- Fixed price: By buying the vendors' products outright and paying for them immediately, you may be able to negotiate lower purchase prices. There is no risk to the vendors, who receive the payment immediately, thereby improving their cash flow. In exchange, they may very well be willing to lower the total prices of the products or services you're buying, producing a savings for you.
- Incentives: If you need to improve your cash flow, you may find it worthwhile to pay your vendors a little bit more for their goods--if the vendors will wait until you have completed your sales and received payment from your customers for them. Such an arrangement costs you a little more, but it improves your cash flow, while the vendor gains some extra money in exchange for delaying the due date of your payment.
Excerpted with permission from Roger Fritz's The Small Business Troubleshooter (Career Press, $16.99,1-800-CAREER-1).