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 in which you will pay them. For maximum convenience you will probably aim to set up an account with each of your major suppliers, who might include:
- drinks wholesalers
- tobacco companies and brewers
- wholesale wine merchants and importers
- grocery wholesalers
- Fairtrade suppliers
- newspaper wholesalers
- DVD and computer games rental package suppliers
You might also set up an account with the National Lottery (or Health Lottery) operator.
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.
You may be able to negotiate various discounts from your suppliers for:
- paying your bill within a specified period, for example, 2% - 3%
- buying stock in large quantities, for example, 5% - 10%
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 sell 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 shift for ages or which you are not certain you will sell. Storage and security problems might also be an issue.
Alcohol wholesaler registration
Be aware that from April 2017 you will need to make sure that all of your alcoholic drinks suppliers are registered with HMRC under the Alcohol Wholesaler Registration Scheme (AWRS).