Extending payment terms with supplier
Discussion
Evening everyone.
We started working with a new supplier towards the back end of last year, they sell a highly desirable product within our sector and their last 'big' delivery was December so we placed an order for about £70k.
With all our suppliers we always pay up front or (rarely) within 14 days of receiving the product. The above supplier wanted 33% up on placing the order, 33% on delivery and the remaining 30 days after, this wasn't a problem and went to plan.
Their next 'drop' of this product is June/July and we want to place an order for about £150k however this will be pushing slightly for us, as mentioned we have always just paid up front so paying on terms is new to us.
Based on the above would it be out of place for us to try and extend their payment terms so we can increase our order size?
We were thinking 33% when ordering, 33% 30 days after delivery and then the remaining (max) 90 days after delivery, realistically we should be able to settle the final balance within 30-45 days but dont want to cut it too short.
Before I go to them with my plan does this sound reasonable/common?
The company in question is a multimillion pound company, our order of 150k is still relatively small to them tbh.
We started working with a new supplier towards the back end of last year, they sell a highly desirable product within our sector and their last 'big' delivery was December so we placed an order for about £70k.
With all our suppliers we always pay up front or (rarely) within 14 days of receiving the product. The above supplier wanted 33% up on placing the order, 33% on delivery and the remaining 30 days after, this wasn't a problem and went to plan.
Their next 'drop' of this product is June/July and we want to place an order for about £150k however this will be pushing slightly for us, as mentioned we have always just paid up front so paying on terms is new to us.
Based on the above would it be out of place for us to try and extend their payment terms so we can increase our order size?
We were thinking 33% when ordering, 33% 30 days after delivery and then the remaining (max) 90 days after delivery, realistically we should be able to settle the final balance within 30-45 days but dont want to cut it too short.
Before I go to them with my plan does this sound reasonable/common?
The company in question is a multimillion pound company, our order of 150k is still relatively small to them tbh.
JCKST1 said:
The company in question is a multimillion pound company, our order of 150k is still relatively small to them tbh.
Depends what you mean by multimillion? £3m turnover? £30m? £300m?Just because it's a big company doesn't mean they'll have a more relaxed attitude towards risk. In fact, the larger the company the more processes and procedures they'll (probably) have in place so could be less flexible when it comes to negotiating terms.
All depends on the availability of the product and how you sit in the market compared to your competitors.
As DS says you risk flagging yourselves up? Plus if the product is in demand with short supply you need to be doing everything you can to ensure you get your hands on the stock - handing over money quickly without hassle is the easiest way to ensure this...
Finally, this is your 2nd order? Give it a several more, build a rapport and then ask? With new suppliers I often have to pay for 3/5 orders upfront before they consider any terms - I wouldn’t start asking for favours until I’ve put a good 12-18months of reliable business under their belt.
As DS says you risk flagging yourselves up? Plus if the product is in demand with short supply you need to be doing everything you can to ensure you get your hands on the stock - handing over money quickly without hassle is the easiest way to ensure this...
Finally, this is your 2nd order? Give it a several more, build a rapport and then ask? With new suppliers I often have to pay for 3/5 orders upfront before they consider any terms - I wouldn’t start asking for favours until I’ve put a good 12-18months of reliable business under their belt.
JCKST1 said:
No worries guys, I thought as much.
We will stick to the original amount and should be fine but it could be tight for a few weeks unless we start taking some pre-orders to fill the gap.
Is this your “go big or go home” moment your golden opportunity ? If it is then don’t bottle it so easily. We will stick to the original amount and should be fine but it could be tight for a few weeks unless we start taking some pre-orders to fill the gap.
Will you have stock when others don’t ?
Can you increase profit?
Can you grow in the sector?
Can you improve marketing / conversion rate
Can you attract lifetime value customers
Can you increase AOV ?
Happy to have a chat if you wish.
Having favourable terms is very, very common.
In most instances the key to getting them, is trust built through a long relationship. Given how long you have been using them I doubt they would give you such favourable terms this early, that said, you don't ask, you don't get.
As others have said bigger companies tend to stick to their guns a bit more firmly due to internal process and red tape to get things changed and approved.
In most instances the key to getting them, is trust built through a long relationship. Given how long you have been using them I doubt they would give you such favourable terms this early, that said, you don't ask, you don't get.
As others have said bigger companies tend to stick to their guns a bit more firmly due to internal process and red tape to get things changed and approved.
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