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Squeezing
Vendors:
Get the most from suppliers
At the
grocery store, it's how you choose the most
delicious fruit. Why not apply the same method to
secure the best possible terms from your vendors?
Squeeze 'em!
1) Secure volume discounts Determine who you
spend the most money with and make sure they know
about it. To find out, print the Vendor Last A/P
report. Then contact them to negotiate a volume
discount. Or consider using other vendors more
often than in the past.
2) Always use POs POs remember what was
agreed to -- both about dollars and scope of work.
They are your backup should you need to deal with
situations that are outside the originally
agreed-to work.
3) Determine when it pays to take vendors' early
payment discounts A rule of thumb is to take a
discount if you could not invest the money and earn
more than you'd save. For example, 2/10, net 30
terms equal 36.73% a year! If you can't beat that
with an investment, take the discount!
4) Pay vendor invoices when due Unless it
pays to take a discount, pay vendors only when
invoices are due. And know the ones to call for an
extension (with no interest charged) should you get
into a bind. Take advantage of the "weekend float".
Send checks out on Friday. This keeps your money in
your account a little longer (and earning more
interest, right?)
5) Place vendor on hold If situations
warrant, place vendors on hold. (Each vendor's file
has an "on hold" checkbox.) New POs or invoices
can't be added for a vendor who's on hold. Include
a user-defined reason why the vendor is on hold, as
well.
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By Elaine
Hilmer
In today's business environment, an entrepreneur is most
likely to succeed when using a budget to measure business
performance. A budget forecasts cash flow -- how money will
move through your business -- and is the dollars-and-cents
implementation of your business plan. A budget is your key
to success.
When setting up your budget, it's important to be realistic
(perhaps even a little pessimistic) and consistent. Once
your budget is set up, don't put it away! Budgeting is an
ongoing process and the budget should be reviewed and
revised regularly. Regular attention will spotlight any
upcoming shortages so you can prepare for them.
As a practical tool, your budget must be realistic and easy
to use. There are many methods for creating a budget, so
choose one that you're comfortable with. The simplest method
is the top-down approach using last year's actual figures
and adding a percentage. As you review your budget, update
each expense to allow for changes.
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Budgeting for large capital items
is crucial. Capital spending, if not controlled, can have a
debilitating effect on cash flow. To assess the viability of
a project, express it in financial terms based on how much
revenue it will produce or the expense it will replace.
Consider the benefits and risks of the expenditure, allowing
for any additional expenses it might generate. Also, if you
use short-term financing, include the cost of financing in
your outflows, and be sure to include sales and income tax
payments.
When you drop your actual figures into the budget you get a
projection of the year's results immediately. By
benchmarking your predicted cash flow against actual agency
performance, you'll see how money is moving through your
business. Managing your cash flow with budgets is a powerful
tool, and you'll be amazed at the level of comfort you get
when you know what you're dealing with.
Elaine
Hilmer is a Clients & Profits consultant. She can be
reached at (212) 868-3232.
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