When you buy supplies of goods and services 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 will make to your creditors (including VAT) in the months in which you will pay them. For example, you will be dealing on a regular basis with suppliers such as feed merchants and agricultural suppliers, and with service providers such as vets and farriers. If you offer catered accommodation you may be ordering from specialist wholesalers to the catering sector.
Setting up an account
For convenience 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.
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 (although bear in mind that storage may be a problem)
In some cases suppliers may impose minimum order conditions and charge for delivery.