It pays for a business to pay on time

Johannesburg - Maintaining your business’ professional and financial reputation is one of the most valuable assets of any business, according to Accenture, a global management consulting company.

Accordingly, in today’s competitive environment, small business owners should establish specific strategies for improving profitability based on established and loyal relationships with suppliers.

Effective supplier relationship management has, therefore, become an imperative, not a choice.

Accenture found that business owners, who are proactively engaging with their suppliers, are gaining insight into actions that create value, reduce cost, enables innovation, manages risk and drives business growth.

Research found:

- Suppliers have a direct impact on the financial performance and profitability of a business as they influence, amongst others, inventory levels and the timely delivery of goods and services and the businesses ability to operate effectively;

- A business’ approach to maintaining good supplier relationships is vital and needs to be part of a strategic plan because almost every company is dependent on suppliers – whether that business is product or service-orientated;

- Small businesses may consider incorporating a rebate structure into their strategic plan as part of their on-going relationship with their suppliers.

In a win-win situation, the supplier may be able to negotiate a percentage price reduction that results in a rebate, saving the business owner a percentage from the price they could not obtain on their own;
 
- Although a rebate structure can help ease cash flow, the business’s working capital may still be compromised by needing to pay for stock in advance after slower trading months.

Most small businesses require a healthy cash flow – this can be hard to maintain in a depressed economy, particularly if your business is affected by the seasonality of trading.
 
In a recent research survey conducted by Retail Capital amongst 25 000 small business owners, access to working capital was cited as the biggest challenge faced by SMEs.
 
“More and more small business owners are finding that the best solution to seasonal cash flow challenges are alternative funding solutions that are tailored to their specific needs,” said David Lewis, CEO of Retail Capital.

"Business owners have so many balls to juggle that a cash flow injection at the right time can make all the difference in maintaining healthy supplier relationships and the maintenance of a solid financial and business reputation."

- Fin24