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 that you will make to your creditors (including VAT) in the months in which you will pay them. Don't enter the cost of the tools you offer for hire here - include this cost elsewhere under 'Capital expenditure'.
You might set up accounts with manufacturers, wholesalers or importers from whom you buy spares and consumables like saw blades, sanding disks, dust masks, fluids, coatings and so on.
Setting up an account
For convenience and to get the best terms of trade it is usually wise to set up accounts with all 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
- retrospective rebates
- volume discounts
Some suppliers may also offer items such as free display stands, help with promotions and so on. These are likely to be related to the amount of business you put their way.
In some cases suppliers may impose minimum order conditions and charge you for delivery.