January 20, 2012

It’s a simple fact of business today – customers need a break when they can get it.

And if you’re a business owner, you’re most likely a customer, too. You’ve probably dealt with the same vendors for years – and perhaps have grown to take each other for granted.

hand shake

Is it time to start negotiating more strongly with your vendors?

Vendors need their customers just as much as you do, so many of them may be willing to negotiate to a reasonable degree. If you have a long-standing relationship with a vendor, you might ask them to honor your years of loyalty by providing a discount for a set period of time. Or, perhaps you can negotiate better payment terms to help you better manage your cash flow.

As a longtime customer, you may have developed a relationship that you are hesitant to leave. If so, you want to be clear that you’re not threatening to leave – you’re simply asking for some consideration so that both you and the vendor can make it through this tough time. If you buy from several vendors, you might also want to consider consolidating some of them.

You may be diluting your buying power by purchasing from too many sources – not to mention managing more vendors and writing more checks. Consolidating some of your purchases to fewer vendors can offer several benefits, such as:

  • Making you a more important customer, so you may receive better pricing and better service.
  • Lowering your risk because vendors that are more diversified and offer a broader range of goods and services may be more stable through changes in the economy. Conversely, buying from smaller vendors that have all their eggs in one or two baskets could put your company at risk if those vendors run into financial difficulty.
  • Reducing your administrative costs because you’ll have fewer invoices to process and fewer checks to write.

There is a caveat, of course. If you consolidate too much, and the large vendor has difficulty, you could find yourself unable to get the goods or services being provided.

Be sure to check the financial stability of any vendor you count on. Do your due diligence.

This article was originally posted on January 20, 2012 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.