When you buy supplies on account instead of paying cash there and then, your suppliers are your creditors until you pay them. 'Payments to creditors' are the payments you make every month or so to your major suppliers of stock - personal care products, treatment creams, shampoo, wax, consumables, tanning solutions and so on. 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.
If your salon is part of a franchise, you may well be obliged to purchase a certain amount of stock from your franchisor.
Setting up an account
For convenience - and to get the best terms of trade - it's usually preferable 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
- retrospective rebates
- volume discounts
Some suppliers may also offer items such as free display stands for retail sales of grooming products, help with promotions and so on. These are likely to be related to the amount of business you put their way.
Other incentives and special deals
Many of the specialist suppliers to the male grooming sector offer a very comprehensive range of goods and services. From one of these you might be able to obtain:
- salon furniture and treatment couches
- specialist equipment
- grooming products
- consumables such as cotton wool, tissues, disposable gloves and so on
- leasing facilities/interest free credit
In some cases suppliers may impose minimum order conditions and charge you for delivery.