Managing Your Creditors

3. Building a Relationship

Will the supplier go the extra mile for you when you need a rush delivery, or extended credit?

3.1 Negotiate clear, written agreements at the outset. Then stick to them.

• Be aware of your supplier's right to interest on late payments.See Interest on late payments.

3.2 Involve your suppliers in your business, so that they understand your needs.

• Suppliers are often good at coming up with ideas for how to improve your product or your whole business, as they supply other companies like your own.

3.3 Keep them informed, to build up their trust in you. Otherwise small problems can escalate into large ones.

• A common example is the situation where you withhold payment because you received damaged goods. It is not enough to telephone the operational manager at the supplier, to explain the situation. You should also confirm it in writing and copy the letter to the managing director or finance director there - otherwise when they review the aged debtors list, they may assume that you are simply refusing or are unable to pay on time.

3.4 Ask for benefits in return for giving suppliers what they want.

• For example, you might negotiate to receive an enhanced service in return for committing to place regular orders or pay on shorter terms.