Progressive Grocer - March 2010 - (Page 50)

Independent Retailing How small businesses can succeed Keep Cash Flowing With Trade Terms In a slow economy, when profits are slim, trade term discounts can be a valuable tool for boosting margins. By Richard Flynn veryone in retail knows the scenario: the economy slows, customers’ wallets snap shut and your cash is left stuck in unsold inventory. One of the best ways to deal with this classic situation is to turn to a classic cash-flow management tool known as trade terms. Unfortunately, while many small-business owners already rely on this proven tool, just as many don’t take advantage of what trade terms offer, either because they’re not aware of the benefits, or because they don’t — or think they don’t — have access to trade terms or other useful alternatives. To make the end of the month a bit easier, it pays to understand how trade terms work, how they can be used to even out cash flow, and what you can do to gain access to trade terms, or similar tools. Understand the Basics of Trade Terms take time to persuade a vendor. Because trade terms are about trust and creditworthiness, you can expect the most from companies with which you have the longest and best relationships. If you’re not successful in gaining trade terms, look at what makes your best customers valuable and use that knowledge to make yourself more attractive to vendors. Volume and regularity of business are both important factors. In the case of vendors that don’t offer trade terms, as well as expenses such as utilities that will never qualify, look for other ways you can improve cash flow. Using charge and credit cards that offer cash back or other rewards is one way of earning a discount. Another possibility is to use cards that offer trade-like terms. Also consider other non-cash payment methods such as bartering and using rewards from credit and charge cards. Keep Credit Records in Order The idea behind trade terms is simple. A company and its suppliers agree on the timing of payments and how much is due at a given date, such as payment in full in 30 days. To encourage early payment, however, suppliers may include an incentive of 1 percent or 2 percent for customers who pay within 10 days. When your business has cash and can make early payments, earning a 1 percent or 2 percent discount is a great option that puts your cash to work. In a slow economy, when profits are slim, discounts like this are a valuable tool for boosting margins. There are, of course, times when an early payment isn’t an option. To help alleviate this classic cash-flow crunch, some vendors offer trade terms that will permit you to delay payment. Under these terms, customers agree to make a designated partial payment and then defer full payment for a specified term, such as for an additional 30 days. Actively Pursue Trade Terms Additionally, it’s important to establish and keep a strong credit record. Make it easy for vendors and credit issuers to confirm that you’re an established business by registering with commercial credit bureaus like Dun & Bradstreet and the Small Business Financial Exchange. You’ll also want to make certain that the credit records on file are up to date and accurate. Contact credit bureaus to verify the information in your credit report and check your company profile for errors. Cash flow isn’t just a problem businesses face in tough economic times; in the fast pace of an economic boom, otherwise successful businesses can perish simply because of poor cash flow. Remember that the better you become now at dealing with the challenges of cash flow, the better you’ll be in running a strong business in any economy. Richard Flynn is SVP and general manager for American Express OPEN, the nation’s leading issuer of card products for small-business owners. www.progressivegrocer.com Approach your vendors to negotiate more favorable terms, but keep in mind that some vendors simply don’t offer them, and that it may• Progressive Grocer • March 2010 A H E A D O F W H AT ’ S N E X T http://www.progressivegrocer.com

Table of Contents for the Digital Edition of Progressive Grocer - March 2010

Progressive Grocer - March 2010
Table of Contents
Nielsen’s Shelf Stoppers/ Spotlight: Dairy/Yogurt
Green Grocer Awards 2010: Seeing Green
Multicultural Marketing: Use Your Common Census
Harold Lloyd on … “Making a Difference”: The Employee’s First 30 Days: It’s Now or Never
The Lempert Report: Enter the ‘Koodies’
Independent Retailing: Keep Cash Flowing With Trade Terms
Progressive Grocer’s 2010 Meat Operations Review: Value on a Platter
Progressive Grocer’s 2010 Seafood Operations Review: Seafood Hits its Stride
Executive Insight Series: Lasting Impressions: Forward Thinking
Produce: Tracking the Transition to Traceability
Meat: Heinen’s Freshens up Service Benchmarks
Natural/Organic: Nature’s Best on Ice: Natural and Organic Frozen Foods
Frozen/Dairy: Cold and Colder: Trends in Frozen and Dairy
Baby Food: Green to Grow On
Green Promotions: Along for the Ride
Foodservice: Loaded for Bar
Case Study: Clean Carts
What’s Next: Editors’ Picks for Innovative Products

Progressive Grocer - March 2010