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Maintaining good relationships is vital
They found that business owners who are proactively engaging with their suppliers are gaining insight into actions that create value, reduce cost, enables innovation, manages risk and drives business growth.
"Suppliers can have a direct impact on the financial performance and profitability of a business as they influence, amongst others, inventory levels and the timely delivery of goods and services and the businesses ability to operate effectively," says David Lewis, CEO of Retail Capital, an alternative funding provider.
He further notes that a business' approach to maintaining supplier relationships is vital and needs to be part of a strategic plan because almost every company is dependent on suppliers - whether that business is product or service-orientated. Small businesses may consider incorporating a rebate structure into their strategic plan as part of their on-going relationship with their suppliers. In a win-win situation, the supplier may be able to negotiate a percentage price reduction that results in a rebate, saving the business owner a percentage from the price they could not obtain on their own.
Working capital a challenge
Although a rebate structure can help ease cash flow, the business's working capital may still be compromised by needing to pay for stock in slower trading months. That said, most small businesses require a healthy cash flow - this can be hard to maintain in a depressed economy, particularly if your business is affected by the seasonality of trading. In a recent research survey conducted by Retail Capital amongst 25,000 small business owners, access to working capital was cited as the biggest challenge faced by SMEs.
"More and more small business owners are finding that the best solution to seasonal cash flow challenges are alternative funding solutions that are tailored to their specific needs," says Lewis. Retail Capital has successfully pioneered alternative funding in South Africa over the last three years by building on the very successful cash advance model that has flourished in the United States and the United Kingdom for over a decade.
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