Business Finance

5 Profit-Pulling Tips for Managing Vendors to Pump Cash Flow

Written by Ashwin Satyanarayana for Gaebler Ventures

Vendor and Supplier loyalty is something all small businesses look for as it gives them the leverage to manage Cash Flow. They play a vital role in determining your profitability and the best way to manage inventories is to get these two major players involved in the business process.

Suppliers and vendors are an inevitable part of your supply management and distribution chain and as such, your vendors play a vital role in determining your profitability at the end of the day.

Getting the most out of your relationships with vendors has a lot to do with your brand, your market share and your credibility pull. Wal-Mart, Toyota and a few other companies are role-models for managing their vendors and suppliers for maximum profitability.

Here are some profit-pulling tips for managing vendors that you can learn from these iconic companies:

Develop a brand first, think about squeezing vendors later: The best results of your vendors and suppliers comes in when you reach a stage where you can operate from the stand point of power that comes from unquestionable brand value - the way Starbucks, Wal-Mart and Toyota operate. While it takes time to get to this stage, understand that the real benefits of valuable and profitable business relationships with vendors surfaces when you reach up to leveraging your outstanding, impeccable brand value. It is in the lap of strong brands that money finds itself parked, most of the time.

Let them add value to their relationship with you: How about making your vendors have quality inspection policies in place such that you don't have to waste time doing that? Can your vendors also look at fulfilling majority of the paperwork when exporting or importing goods, for instance? Can you think of various ways your vendors or suppliers can add value to the business relationships in place? They might not know how since they focus on their operations completely; it's up to you to engage them in your planning and add value to the supply chain to smoothen your operations and increasing your cash flow.

Provide volume discounts: Just like most individuals refrain from bargaining when they are out shopping, most businesses don't bargain too. They often purchase in bulk from vendors but don't ask for sizable volume discounts - in spite of the obvious knowledge that large buys mandate price discounts. Even if you don't buy in bulk, but buy recurring instead, it still qualifies because your vendors will profit. One of the most surprising and common mistakes business houses make is not to ask for discounts. All you need to do is to ask for it.

Plan with your Vendors; not in isolation: Plan your operations with your vendors and suppliers in tandem. Bring them to your table because they are an inseparable part of your supply chain. Processes like Just In Time, for instance, require a high involvement from the vendors and suppliers because it is their active involvement that makes these processes so effective. In such cases, and many others, it is vital to involve your suppliers in your operations planning.

Focus on long-term relationships: We all know that loyalty has its place in business; in business operations too, long-term relationships based on trust and loyalty create tremendous - almost unbeatable - value. Not only does it make doing business with each other easier, but it also helps create 'deals' which can rapidly save you tons of money and save you cash that you can use for your business growth.

Ash has an undergraduate degree in engineering and an MBA from Ohio University. Today he is a corporate trainer, business coach and a freelance writer.

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