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Negotiating a better deal with your suppliers can be one of the best ways to grow your profits, but it takes skill, diplomacy, and a bit of thought to pull it off.
Supply costs are one of the major costs associated with running a business, but having this cost lowered takes a bit of preparation.
What can you do to give you the best possible shot of negotiating a better deal with your suppliers?
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1. Communication is key
Good supplier relationships may lead to favourable prices, generous terms, improved availability, and even the occasional buyback.
With these sorts of opportunities at stake, it’s very important to focus on your communication skills.
Before you contact the suppliers, you need to do some homework.
Your approach to suppliers needs to be part of your strategic plan since almost every business, is dependent on suppliers.
By being attentive and responsive when talking to your suppliers on a day-to-day basis can build a better rapport with your suppliers.
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2. Be a loyal customer
Suppliers want to sell as many products as they can and they appreciate the customers who will give them repeat business.
When negotiating with suppliers, make sure they know you’re someone who will give them repeat business.
3. Offer larger deposits
Along with being a loyal customer, suppliers appreciate larger deposits on orders.
If the supplier knows they will receive 50 to 60 percent from you up front, you will increase your bargaining power.
It may be better for them to have a higher deposit on a lower priced order than a lower deposit on a higher-priced order.
4. It’s more than a price point
Sometimes when you’re negotiating for a lower price, your supplier may not accept the offer.
The good news is you can still negotiate for other things other than price, that will help lower your overall expenditure.
For example, while you may not get a break in overall price you may be able to negotiate speedier delivery of goods to your business at no additional cost.
The sooner you have the goods at your store the better, as we all know time is money.
5. Make sure you’re both on the same page
During a negotiation, you will come across several signals indicating it’s time to close the deal.
When the supplier starts accepting your terms and conditions and presents very few counter offers, the supplier is willing to close the deal.
Before closing the deal, summarise all the points you have discussed to avoid any disagreements at the time of signing the contract.
6. Manage supplier invoices in a timely fashion
If you’re a problem customer who doesn’t pay your suppliers on time, you may not get the best deal.
It’s important to maintain good supplier relationships by paying your bills on time.
ERP software gives you a more accurate view of your cash flow and makes your tax obligations easier by storing your paper bills and supplier invoices directly and securely in your accounts.
Negotiating with suppliers doesn’t need to be difficult, but it does pay to have a plan before you approach them.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.
