Late deliveries, incorrect orders, faulty goods and services. All could have a serious impact on your business so it’s important to use suppliers you can trust. Steve Jennings, director of business banking at Alliance & Leicester Commercial Bank, offers tips for managing suppliers:

Establish the specific needs you want your suppliers to meet. While keen prices are always important, you may also need suppliers who can turnaround orders quickly, fulfil one-off requests or offer a customised service.

Consider drawing up a service level agreement with your suppliers to formalise the relationship. This should cover every aspect of the relationship, your respective responsibilities, key performance and monitoring criteria and methods of payment dispute resolution.

Consider whether you can save money on regular smaller value purchases by negotiating a prompt payment discount with your suppliers.

Invest time in building up a good relationship with the main suppliers. Find out how they operate and what services they offer that could benefit your business. Find out who will be dealing with your account and ensure that there will be good channels of communication so that any problems that arise can quickly be dealt with.

Don’t make life hard for your suppliers by bad planning. Make sure that you order necessary supplies in good time to avoid extra charges for special deliveries or risk jeopardising your customers’ orders because supplies aren’t available at short notice.

You may be able to negotiate preferential terms by nominating a major or preferred supplier for certain goods but ensure good communication to ensure that any problems your supplier might encounter do not have knock-on effects to your business.

Formalise your purchasing by maintaining a purchase order system to control and monitor any goods or services you buy. Set up an approval system to ensure that you know exactly what is being ordered and why. Insist on a purchase order for every purchase no matter how small or large the amount and make sure that invoices are checked against orders and deliveries.

Make sure your purchasing systems keep pace with business growth by carrying out regular reviews. If you have more than one department or several branches making purchases, duplications are likely to occur. By centralising your purchases you could achieve economies of scale that will save you money.

Review your suppliers annually to make sure that you are still getting the best deal but when making comparisons, ensure that you are comparing like with like.

This applies to all suppliers, even your business banking provider and it has never been easier to compare, with sites such as Business Moneyfacts which provides an online comparison table, go to: http://www.moneyfacts.co.uk/business/default.aspx

Consider the timing of your purchases and balance the cost savings you may achieve with bulk buying with the cost of having capital tied up in large volumes of dormant stock. When purchasing raw materials, work out a purchasing schedule based on actual orders and sales forecasts.

Alliance & Leicester Commercial Bank has operated as a dedicated business finance provider for 40 years and offers a full range of banking services to businesses of all sizes.

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By Steve Jennings  on   Jul 12,2008

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Keywords

suppliers    payment    business deliveries    negotiation    customers   

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