Talk to Your Vendors

Ever found your company unable to get products to sell or services needed to operate? If so, you’re not alone, but it is not hopeless.

Don’t Keep Me in the Dark

Probably one of the worse things you can do in dealing with vendors is to not keep them apprised of the condition of your company. No, I’m not saying you need to tell them everything about your company. Some things are confidential, particularly the long-term plans you have. When I say condition, I’m primarily referring to the financial strength (or even weakness) your company is experiencing.

Why Do They Need to Know

Think about something. Don’t you tend to have more trust for people who tell you the truth, without withholding the bad in an attempt to look better in your eyes? Of course you do. If you want your vendors to continue to meet your needs, they need to be confident that they will get paid. If you are running tight on cash, you are better off to let them know up front and to provide a time frame for when they can expect to get paid. The last thing they want is to sell to you and then find that you cannot pay on time. It is far better to know up front. If you let them know you won’t be able to pay until 60 days rather than the normal 30 days, their comfort is increased if they know this in advance and have some explanation of why. If you can demonstrate that the collection cycle for your customers is the cause or that the seasonality of your business means that you will periodically have to have extended terms, let them know. They probably want your business, but they don’t want to be wondering if they will get paid.

An Advantage

I actually had a client tell me one time that lying to his vendors was necessary and that it was the way business is done. Well he is now out of business. Of course, there were others issues involved, but I believe his lack of integrity was integral to his business failing. He lost a key advantage that honesty brings.

When you let your vendors know in advance when you will be able to pay and are willing to work with them on order quantities, etc., then over the course of time you will develop a reputation for trustworthiness. It is even better if you are occasionally able to surprise them by paying earlier than you originally thought you would be able. A pleasant surprise can greatly increase your reputation as the kind of company they want as a customer.

What about your company? Are you hiding from your vendors, keeping them in the dark, or stringing them along with late payments and not communicating your financial condition? If so, I suggest you take a more open approach to your relationship with vendors. Talk to them and be honest in doing so. You’ll be glad you did.

If you are not sure how to make this adjustment, AimCFO would like to help.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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