Tips for small businesses to strengthen vendor relationships

Cash flow is often the number one priority for small businesses, as well as what keeps many business owners up at night.

Having sufficient cash flow is vital to the success of any business and can prove critical in building and maintaining strong supplier relationships, which in turn can help strengthen your business, lead to cost savings and more.

Here are tips for strengthening your small business’ vendor relationships and the value it can provide.

PAY EARLY TO REDUCE EXPENSES >> Many vendors offer early payment discounts as an incentive for prompt payment, which is just one of the many reasons maintaining sufficient cash flow is important. Paying vendors early or within 30 days can offer several advantages, including:

• Discounts: By paying within 30 days, a business can take advantage of discounts offered by suppliers, reducing overall purchasing costs and enabling them to reinvest any savings elsewhere in the business.

• Creditworthiness: Consistently paying vendors early demonstrates financial responsibility and strengthens the business’ creditworthiness. This can lead to improved credit terms, increased credit limits and better access to financing options for when your business needs it in the future.

• Reduced Financial Stress: Keeping your business nimble is crucial, particularly in a tough economy. Early payments contribute to better cash flow management, which can reduce financial stress on the business, allowing it to allocate funds strategically and respond more effectively to market opportunities or challenges.

• Avoid Late Fees: Paying within 30 days helps businesses avoid late payment fees or penalties imposed by vendors for overdue payments, ensuring cost savings and preventing unnecessary financial strain.

BUILD STRONGER RELATIONSHIPS FOR IMPROVED PERFORMANCE >>

In addition to the cost benefits, paying vendors early can also help strengthen your relationships with your suppliers.

• Positive Vendor Relationships: Consistent, on-time payments contribute to building positive relationships with vendors, which can lead to better terms and a more collaborative partnership, potentially opening doors to more favorable arrangements in the future.

• Negotiation Leverage: Proactively paying vendors within 30 days provides the business with stronger negotiating leverage. Vendors may be more willing to negotiate favorable terms, pricing or other concessions when dealing with a reliable and prompt-paying customer, providing additional long-term benefits.

•Improved Supplier Performance:

Timely payments incentivize vendors to maintain high-quality products or services and meet agreed-upon delivery schedules. This can positively impact the business’ overall performance and customer satisfaction.

• Enhanced Reputation: A reputation for timely payments can positively influence how the business is perceived within its industry. Suppliers and partners are more likely to view the business as trustworthy and reliable.

Paying vendors early or within 30 days goes beyond simply meeting financial obligations, it can lead to cost savings, improved relationships and increased overall operational efficiency for the business.

One option that could help strengthen your business’ cash flow and provide flexibility for early vendor payments is a working capital line of credit. With a working capital line of credit, interest is only accrued on the funds utilized versus the entire loan amount accruing interest for a term loan, enabling businesses to remain nimble and manage cash flow fluctuations.

Speaking with your local banker and lender can be a great way to evaluate

what options work best for your business, ways to enhance your cash flow and build stronger relationships with your suppliers.

Jeremy Shackleford is Senior Vice President, Director of Small Business Sales for WSFS Bank. He joined WSFS in 2018 after 22 years working in banking and financial services, and was most recently Senior Vice President, Regional Manager for WSFS’ Greater Philadelphia Market, where he oversaw 15 retail office locations. He also served 10 years as a member of the United States Air Force.

Shackleford