Are you simply “accepting rising prices” as it’s a “sign of the times” and assume that these suppliers are “not negotiable”?
Perhaps you have a good relationship with a supplier and would like to renegotiate your prices and terms.
Do you feel like you are constantly trying to negotiate with your suppliers?
Have you considered that you can and SHOULD constantly be negotiating with your suppliers?
More often than not they ARE negotiable and chances are they are negotiating with THEIR suppliers!
In many industries, costs of the original supplier do rise and subside depending on what their resources are. Your suppliers will be constantly negotiating with them and thus you should be unafraid to do the same!
As an example: When fuel prices go down, the acquisition cost will also go down.
In any kind of wholesale or manufacturing environment there is always different price lists depending on “whose asking”.
Never accept “not negotiable”!
The 3 biggest challenges in negotiating price and terms with suppliers are:
– If you don’t ask – you don’t get! Often business owners don’t want to rock the boat with suppliers.
– By not negotiating you will always be paying their premium prices and their “premium terms”, which may not give you as much flexibility as you would like.
– It can end up costing you more than it should, which ultimately affects your bottom line and doesn’t allow you to be as competitive in your market as you need to or should be.
There are 5 key steps to negotiating with suppliers. This will ensure you are prepared, you understand the landscape and are able to negotiate with ease.
– Identify your suppliers and what terms you currently have with them.
2) CONSIDER YOUR RELATIONSHIPS WITH YOUR CURRENT SUPPLIERS
- Long-term suppliers. Those that you have been dealing with over an extended period are generally open to having “negotiation conversations” as the trust relationship is already in place.
- Short term / once off / occasional suppliers. Consider what these relationships look like.
3) RESEARCH THE MARKET
- Shop around for suppliers and see which suppliers are willing to offer better deals (prices and terms) up front.
- Always compare “apples with apples”. The truth is there is always someone cheaper, more flexible and hungry for the business, HOWEVER, you should only consider products that align with your brand, your offering and your end result.
CHEAP is not ALWAYS BETTER!
With the identification of suppliers, clarity on the relationships you have as well as researching the market, you are NOW ready to negotiate.
- By knowing what is available on the market (price, product and terms) you have the upper hand in negotiating and often you are able to leverage off this information.
- The term that comes to mind is “Knowledge is power!”
- It is not always about replacing a supplier but rather knowing your options.
- Remember that a good history of regular, no hassle payments can offer leverage to negotiate extended payment terms.
- Long Term Suppliers have the advantage of knowing your trading history as well as purchasing and payment trends which assist sthem in calculating their risk.
5) FINALISE THE DEAL
Now that you have negotiated you need to finalise and firm up the deal.
- Ensure your paperwork is in order, that contracts are signed and that future pricing reflects your negotiated terms.
- Ensure direct debits and incoming invoices are updated to reflect the negotiated pricing, and of course it is essential to communicate these negotiated pricing and terms to your bookkeeper.
Often by working with your bookkeeper you are able to identify which suppliers you should approach to negotiate more favourable pricing structures, rates and terms.
You will reduce your costs and have more flexibility on terms and pricing.
Is Your Bookkeeper playing their role
Your bookkeeper should play a key role in managing supplier relationships.
By working with you to identify your key suppliers, research the market, understand the negotiation process and ensure that the negotiated terms are reflected throughout your books, you will feel supported and your business will make more money which will allow you to reinvest, save, and offer better value for money to your clients.