When you buy supplies on account instead of paying cash there and then, your suppliers are your creditors until you pay them. Enter in your cash flow forecast the payments - including VAT - that you will make to your creditors in the months when you will pay them.
You might set up accounts with specialist electrical wholesalers and suppliers, builders' merchants and perhaps manufacturers of electrical equipment and fittings. You might also use specialist suppliers such as manufacturers of solar photovoltaic panels.
Setting up an account
For convenience it is usually best to set up accounts with your main suppliers. To do this you may be asked to provide bank and trade references. Until the account facility has been granted you will have to pay for your order at the time you place it. This is known as paying on a pro forma basis.
Once your account has been set up you will be invoiced at regular intervals and expected to pay within a certain number of days of receiving the invoice.
Discounts from suppliers
You may be offered, or be able to negotiate, various discounts from your suppliers. Examples include:
- early settlement discounts of between 2% and 5%
- retrospective rebates (for example 2%)
- volume discounts (for example 5%)
In some cases suppliers may impose minimum order conditions and charge for delivery.