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10 Ways to Increase Cash Flow When Purchasing

October 6, 2017 by Primary Funding

Cutting costs and saving money is always on a business owner’s mind. Let’s face it, no one wants to pay more than the next person. One key aspect that needs to be considered when trying to cut costs is the purchasing side of the business. Saving money while purchasing is important in keeping a company’s cash flow healthy. Here are 10 tips to making sure you are getting the best deal and doing everything you can to save money.

 

1. Stretch out your payables

Although you don’t want your company to be flagged by your suppliers as one that always pays late, find out the maximum amount of time they can let your accounts payables slide and use it to your advantage. This helps cash keep flowing in the company.

 

2. Establish good relationships with suppliers

It pays to establish good relationships with all stakeholders regardless of cash flow, of course, but if you have a solid rapport with suppliers, they are more likely to negotiate with you on payment and payment date changes. This gives you wiggle room in tough situations.

 

3. Ask for early payment incentives

In direct contrast to the last entry, take advantage of any early pay incentives your suppliers have if you can. If they don’t have any such incentives, ask if you can set one up.

 

4. Form a buying cooperative

You can form a group of business people who all need the same supplies and make bulk purchases and then divvy up the supplies between yourselves. The more you buy in bulk, the price for each piece goes down.

 

5. Use cash for bigger discounts when and where applicable

Sometimes your suppliers will reward you if you pay in cash by giving you a discount. You’ll have to decide whether paying with cash, thus depleting your own, is worth the discount they’re offering. If it is, take it.

 

6. Consider leasing instead of buying

Leasing equipment rather than buying it has it’s downsides, of course, but it can also have a positive impact on cash flow. Outright purchasing equipment when a company is expanding can tie up cash or lines of credit that can be better used for day-to-day operations. As lease payments are considered a business expense, you still get the tax benefits of buying equipment despite not actually buying it. Another upside is that you do not have to pay for upkeep and repairs since you do not own the equipment saving more money.

 

7. Use your business credit card

Consider using your business credit card to pay suppliers and make business purchases. Know the card’s grace period well and take advantage of it when necessary. You might have as many as three weeks to pay your bill after receiving your statement that you can take advantage of if necessary. Some cards also have cash-back features, so you may be able to take advantage of those, as well. Great thing as well is you get to spread out payments without dipping into your cash reserves

 

8. Consider using financing for purchases

Even if you have enough cash to make a purchase outright, consider opting for financing instead. You’ll end up paying more, obviously, but it might be worth it to be able to keep your cash for daily operations rather than not having it there anymore for when you potentially need it.

 

9. Avoid shopping in a single place

You may be able to save some money by splitting up where you do your purchasing. Some equipment, like computer hardware, may need to come from a more expensive place because you get value-added service like assistance choosing the right equipment for you and support. Other equipment, like printer cartridges, cables, and non-specialized software, you may be able to buy from somewhere else for cheaper because there is not a big difference in quality.

 

10. Buy used equipment instead of new

Often, used equipment that is still in good working condition can save you up to 80% off the price of a new piece of equipment. Foreclosure auctions are an especially good place to find machinery and other equipment still in good enough condition to be worth purchasing. A lot of great steals are found at these auctions.

Filed Under: Small Business Financing

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