Industry sector:

Chinese catering: 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 when you will pay them. For maximum convenience you will probably aim to set up an account with each of your major suppliers, which might include:

  • specialist suppliers to the Chinese catering sector
  • Chinese supermarkets and food specialists
  • specialist general catering suppliers (perhaps for meat and fish)
  • other food wholesalers
  • local fresh produce retailers such as greengrocers, butchers and fishmongers - it is not uncommon for Chinese and Oriental food retailers to sell products wholesale to local caterers and the market can be very competitive
  • brewers and wine merchants. Don't forget you must only buy alcohol from a wholesaler that is registered under the Alcohol Wholesaler Registration Scheme

Setting up an account

For convenience and to get the best terms of trade it's wise to set up accounts with all your main suppliers. To do this, 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. This is known as paying on a pro forma basis.

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

Discounts from suppliers

You may be offered - or be able to negotiate - various discounts from your suppliers for:

  • paying your bill within a specified period, or paying by direct debit
  • buying stock in large quantities (for example wholesalers may offer 10% volume discounts)

However, think carefully about these - you might prefer to pay a little more for your goods and have a longer credit period so that you have the chance to make some sales before you pay your suppliers. If you are sure that you will use up all the stock you buy in bulk then it can be a good idea to buy large quantities to qualify for volume discounts. What you don't want to do is tie up your valuable cash in stock that you won't use for ages or which has a limited shelf life. Storage problems may also be an issue.

You might consider joining forces with other, similar restaurants and placing larger orders for supplies so that you benefit from volume discounts.