Industry sector: Leisure

Outdoor activity centre: 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 that you expect to make to your creditors (including VAT) in the months in which you will pay them. The types of supplier you use will vary depending on the nature of your business but may include:

  • outdoor activity equipment suppliers
  • general catering wholesalers
  • specialist wholesale suppliers such as fish merchants and wholesale butchers
  • local retailers such as bakers, dairies and so on, as well as local farms

Setting up an account

For convenience - and to get the best terms of trade - it is best 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. This may be, for example, up to a month for equipment suppliers, one week for local retailers and fortnightly or monthly for catering wholesalers.

Discounts from suppliers

You may be able to negotiate discounts from your suppliers for buying stock in large quantities. 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 might also be an issue.