I tell clients that sometimes vendor problems are not their fault. Your vendor may have failed to deliver the product you bought. Or the product may have failed to meet specifications. Or the price might not be what you had agreed to pay.
When this is the case, you have every right to withhold payment until they fulfill their promises to you. You might even need to take them to court.
You’ll need to have the right documents, though, to prove your case. This means you need to eliminate paperwork chaos.
Usually, though, problems with vendors happen because your business is having major problems with cash flow.
Here are 7 ideas for quickly improving cash flow:
– If appropriate for your industry, ask for deposits or advances when you make sales
– Offer discounts for early payment
– Raise your prices
– Negotiate better terms with the vendors you buy from
– Develop a relationship with your bank and ask for a line of credit, perhaps secured by accounts receivable
– Reduce costs; spend only for essentials or for things that are sure to deliver an immediate return
– Defer all high risk projects for better times
These suggestions, though, don’t get to the root problems.
To start solving the root problems, look at the large gap between the typical small business and the top earning small business.
Top earning small businesses consistently earn over $365,000 net a year. And they don’t miss a beat if the owner takes a two-month vacation.
— What Do The Top Earning Small Businesses Do Differently?
Top earning businesses do three things differently.
First, they apply the model described in the E-myth series of books. The owner works on his business, not in his business.
Second, the owner applies the 80-20 rule. 80% of profits come from 20% of customers. The top earning owner focuses on this profitable 20%.
Third, the top earning owner makes sure he has access every day to accurate financial numbers. This owner knows that what you measure, you can manage, what you can manage you can improve.
To become a top earner, the first step is to free up time so you can work on your business.
For most small businesses, paperwork chaos and bookkeeping hassles are huge time wasters.
— The Concept Of Highest And Best Use
Jay Abraham, a renowned marketing expert, emphasizes putting your time and talents to their highest and best use.
The concept of highest and best use is easy to understand – use your time and talents only on tasks that provide maximum leverage. You can do this by applying three simple rules.
First, if someone else in your business or outside your business can do a task better than you can, delegate that task.
Second, if you’re not passionate about the task, delegate it.
Third, if the task is not strategically relevant to your business, delegate it.
Paperwork, bookkeeping, and accounting are tasks that have to be done. But they do not have to be done in-house.
With new technology, you can inexpensively go paperless in your office in 24 hours. And you can completely outsource your bookkeeping and accounting!
You free up huge chunks of time so you can start working on your business. And you get the accurate financial information you need to make profitable business decisions.
Do these things and you’ll seldom have problems with vendors.