You will need to purchase certain supplies and provisions on a regular basis. These will include:
- food and other catering supplies
- cleaning materials and toiletries
- care and medical supplies (for example incontinence pads, dressings and so on)
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 you will make to your creditors (including VAT where applicable) in the months when you will pay them.
You will probably set up accounts with major suppliers, who might include:
- a specialist catering supplier
- other wholesalers, for example a wholesale butcher or vegetable merchant
- specialist suppliers of nursing and care materials
Setting up an account
To set up an account you may be asked to provide bank and trade references and until the account facility has been granted you will have to pay for your order at the time you place it or on delivery. This is known as paying on a pro forma basis.
Once your account has been set up you will normally be invoiced at monthly intervals and expected to pay within a certain number of days of receiving the invoice.
You may be able to negotiate various discounts from some of your suppliers for buying goods in large quantities.
However, think carefully about these discounts. Purchasing goods in very large quantities ties up your cash. Also, many of the supplies that you will purchase are perishable and you may end up throwing some away if you buy more than you can use. In the meantime, they will need to be stored somewhere.
Some of the items you stock may be purchased from other suppliers with whom you don't have an account. These are known as 'Cash purchases' and are dealt with elsewhere in the cash flow.