Industry sector: Retail and wholesale

Art shop: 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 will make to your creditors (including VAT) in the months in which you will pay them.

You will probably be buying artists' materials and related items from manufacturers, distributors and wholesalers, many of which will provide you with a catalogue from which to order. You will also be dealing with suppliers of packaging materials such as paper and plastic bags.

Setting up an account

For convenience - and to get the best terms of trade - it's usually preferable 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'll 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

You could contact your main suppliers to find out what - if any - discounts are available and how much these might be.

Some suppliers may also offer items such as free display stands, colour charts, point-of-sale leaflets, help with promotions and so on. These offers are likely to be related to the amount of business you put their way.

Think carefully about any discounts you are offered. You may prefer to pay a little more for your stock and buy it when you need it, rather than buying large amounts in advance. Your stock will need to be stored somewhere until it is sold and may sometimes spoil in storage. Never be persuaded to buy more than you think you will actually need!

In some cases suppliers may impose minimum order conditions and charge for delivery.