Negotiating extended payment terms with your suppliers is a technique that can be used to delay your cash outflows and improve your overall cash flow. Most of your suppliers will require payment within 20 or 30 days after you receive their bill. If you're like most other business owners, you probably assume that these payment terms are non-negotiable. However, some of your suppliers may be willing to negotiate longer credit terms. Their willingness to offer you better credit terms may be based on one of the following:
This is one of those situations where it can't hurt to ask. But, be prepared to justify your request. Your suppliers will likely extend your payment terms if presented with a strong case!
Deferring expenses. To a limited extent, your business may be able to delay
cash outflows by deferring the payment of certain expenses. Payroll is one
example of an expense that you may be able to defer. If your business pays its
employees once a week, you may want to consider switching to paying your
employees once every two weeks instead. Likewise, if your business writes
payroll checks once every two weeks, you might switch to a monthly payroll
cycle. Sales commissions or sales bonuses are two other expenses that may
provide you with some deferral possibilities. Be sure to review your business
for any other expenses that can be reasonably deferred.