Tips for Negotiating Better Supplier Terms

Cash flow is generally always top of mind for entrepreneurs, but especially so after a turbulent year due to the global coronavirus pandemic.

To improve cash flow, business owners can take many different steps, including expanding their product range and target market, invoicing more quickly, and cutting unnecessary costs.

Another option to achieve positive cash flow movement is negotiating better payment fees and terms with suppliers. Finding more wiggle room in contract and invoice terms can relieve some of the financial crunch, and create more flexibility in the budget.

While working out more agreeable terms can take multiple attempts and treading carefully, it’s worth the time and care. Negotiating can help your company stay afloat when times are tough and better aid you in expanding your business during a growth stage. Here are some ways to work towards improved terms.

Know What You Want to Achieve

Know what you want to achieve before you start the conversation about changing terms. For example, you’re probably looking for ways to cut costs, but is this about getting a percentage discount on all goods, free or discounted shipping, or a deal for orders above a set quantity? Or, maybe you’re after discounts when you pay invoices early?

You might be keen to negotiate for things that help cash flow, such as longer payment terms or the ability to pay by credit card rather than direct deposit. You may also be after faster shipping without additional costs to you or better warranty terms (e.g., expanding what it covers or how long it lasts). Understand what’s most important to you, so you know what to concentrate on when negotiating.

Find Ways to Better Develop Relationships

You’ll give yourself a better negotiating platform if you develop strong relationships with your key suppliers over time, too. Rather than going straight into asking for deals when you’ve never had much to do with companies or their team, take the time to build up rapport authentically. This way, once it’s time to ask for better terms, the people you deal with will be more likely to listen.

Some ways to create improved relationships include not stressing suppliers out by continually requesting rushed orders, and ensuring you pay companies on time. It helps to utilize handy tech-based procurement tools that enable you to manage orders and payments and reduce the likelihood of forgetting things and then handling them too late.

Also, respond to supplier communications promptly, and give positive feedback whenever it’s applicable. You and your team should be pleasant and professional in dealings, whether they’re over the phone, by email, or in person.

Focus on the Suppliers You Spend the Most Money With

Keep in mind that your negotiating time and energy is likely best spent on a select number of suppliers rather than every single one, especially those you’ve only ordered from once or twice before. Focus on the firms you deal with the most, where you spend more money and make the most annual orders. Check your business accounts, budgets, inventory management tools, etc., to determine who your biggest suppliers are.

Plus, it pays to look for ways to consolidate orders, bundle purchases, and try new lines from top suppliers, so you deal with fewer ventures. As a result of this, you are more likely to become a highly-rated customer and have more negotiating muscle to flex. Plus, dealing with fewer companies tends to save time.

Work Out How to Offer Something in Return

Another tip is to see if you can offer something in return to suppliers to get them to be more open to your requests. People don’t like giving something for nothing, so making your offer mutually beneficial can help, provided you offer things you can deliver on.

For example, offer to refer potential new clients to suppliers so they grow their businesses or start buying more products from them rather than some of their competitors. You could offer to pay more quickly or pay by a method that suits suppliers better.

Some other tips to try out include ensuring you’re dealing with decision-makers when starting negotiations and asking for more than you think you can get so you have room to compromise. Also, shop around with multiple suppliers if possible and don’t accept the first offer another party suggests. Each step you follow can add up to significant results that positively impact your venture’s bottom line  both short-term and long-term.