Industry sector:

Pharmacy: Payments to creditors


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) in the months in which you will pay them.

You will be setting up accounts with major suppliers, including:

  • full-line pharmaceutical wholesalers, which hold a vast range of stock (medical and non-medical) and which offer services such as twice daily and emergency deliveries and marketing support. If you decide to approach one of the major wholesalers for funding, you will be expected to purchase a significant proportion of your stock from them
  • short-line wholesalers, which carry a reduced range of fast moving drugs and which may not offer a wide range of services
  • specialist non-pharmaceutical suppliers, perfume and cosmetics manufacturers

You may also buy pharmaceuticals from manufacturers instead of from a wholesaler, under what is referred to as a direct to pharmacy (DTP) scheme.

Setting up an account

To set up an account you will 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. This is known as paying on a pro forma basis.

Once your account has been set up you will generally be invoiced at monthly intervals and expected to pay within a certain number of days of receiving the invoice.

Discounts

You may be able to negotiate various discounts from your suppliers such as:

  • volume discounts if you buy in large quantities
  • early settlement discounts

Some drugs suppliers offer retrospective rebates - these are based on the volume of purchases made over, say, a six month period and are sent to the pharmacist periodically in the form of a cheque.