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 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:
- farms or livestock auctions. (Traditionally, many specialist butchers used to buy their animals from these sources and then arrange slaughtering with a local abattoir. However, tighter legislation has forced the closure of many small abattoirs and a lot of butchers have had to look elsewhere for their supplies)
- small abattoirs
- general food wholesalers if you plan to sell groceries as well as raw meat
- bakers, if you plan to make and sell sandwiches
Setting up an account
To set up an account 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 the invoice.
Discounts from suppliers
You may 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
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 do not suffer too much wastage if you don't sell as many perishable items as you had hoped.