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Last updated on 2024年7月24日

You're struggling with cash flow in Corporate Accounting. How do you decide which vendors to pay first?

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Navigating cash flow challenges in corporate accounting can be daunting. When revenue ebbs or expenses surge, you may find yourself having to make tough decisions about which vendors to pay first. It's a delicate balance: maintaining good relationships with suppliers while ensuring your company's operations continue smoothly. Understanding how to prioritize payments is crucial for your business's financial health and reputation. Let's delve into strategies that help you decide which vendors to prioritize when funds are tight.

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Ricardo Ribeiro Contador IFRS

ControllerIIFRSI Head of tax and accounting|Tax planning|Contabilidade Gerencial │Perito Contábil│
Arthur Cresci

Senior Collector / Workout Analyst

1 Assess Urgency

When cash is tight, assess the urgency of each vendor's payment . Consider the consequences of delayed payment – will it halt production, affect critical services, or incur late fees? Prioritize vendors providing essential services that keep your business operational. Utilities, raw materials suppliers, or any vendor whose non-payment could lead to a significant disruption in your business should be at the top of your list. This approach minimizes operational risks and maintains essential business functions.

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Ricardo Ribeiro Contador IFRS

ControllerIIFRSI Head of tax and accounting|Tax planning|Contabilidade Gerencial │Perito Contábil│
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A melhor base de analise para essa decis?o deve ser a relevancia ao processo produtivo e do fornecedor no processo estratégico total da Companhia. Isso pode determinar a forma de parceria e da própria entrega do seu produto.

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Arthur Cresci

Senior Collector / Workout Analyst
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Ensure suppliers critical to maintain business operations are provided a truthful answer regarding cash flow. In addition make sure you are speaking with the Controller, Vice President or CEO or all three. During this call after gauging the feedback my next recommendation would be an increase in terms. Net 45 or 60 could prove very beneficial especially if one backs that up as indicating this isn’t a long term situation. The truth will provide you options to navigate cash flow challenge’s.

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JOSEPHINE EZE-UBAH ACA, ACMA, ACTI, MBA

Chartered Accountant | Business Analyst | Financial Analyst | Data Analyst | Internal Control speacialist | Tax Advisor | QuickBooks Online ProAdvisor| Bookkeeper
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Prioritizing Vendor Payments Amid Cash Flow Struggles When struggling with cash flow in corporate accounting, prioritize vendor payments strategically. First, categorize vendors based on criticality to operations, essential suppliers, those with strict payment terms, and those offering early payment discounts should be prioritized. Evaluate the impact of delayed payments on business continuity and relationships. Communicate transparently with vendors about payment plans to maintain trust. Utilize a structured approach, such as the ABC analysis, to rank vendors by importance and urgency. This method ensures that essential operations continue smoothly while managing cash flow effectively.

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2 Evaluate Terms

Next, examine the payment terms agreed upon with each vendor . Some may have strict terms with penalties for late payment, while others might offer more flexibility or even early payment discounts. Prioritize those with less lenient terms to avoid additional fees that can strain your cash flow further. Remember, preserving cash is about managing outflows without compromising relationships; clear communication with vendors about your situation can sometimes lead to renegotiated terms that are more favorable during tight times.

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Lisbeth D. Toth, MBA

Independent Accounting Consultant - Controller - Expert Account Reconciliation - Software Maxization
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Many of these answers listed are valuable. Importance of product and being open an honest with your vendors are the two I consider to be the most important.

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Halisa Lutvi?

Finance Associate | Accountant/ Bachelor's in Organizational Management
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Check the payment terms for each vendor. Prioritize those with the shortest payment deadlines or those who offer discounts for early payment to save on costs.

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3 Consider Importance

Reflect on the strategic importance of each vendor to your business . Are they providing a unique product or service that you can't easily replace? If a vendor is crucial to your product's quality or uniqueness, ensuring their invoice is paid on time could be vital for maintaining your competitive edge. Prioritize payments to these key partners to safeguard the core value they add to your business, which in turn protects your brand and customer satisfaction.

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4 Maintain Relationships

Maintaining strong relationships with vendors is essential. When deciding whom to pay first, consider the history and future of your dealings. A vendor who has been flexible with you in the past may be more understanding of a delayed payment, but don't take this for granted. Prioritize vendors who you rely on for ongoing supply and with whom you want to maintain a good rapport. Sometimes, a quick call explaining your situation can go a long way in preserving a valuable business relationship.

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5 Plan Strategically

Strategic financial planning can prevent cash flow issues from recurring. Create a cash flow forecast to anticipate future inflows and outflows and identify potential shortfalls. Prioritize payments to vendors that align with your long-term strategic goals and financial plans. By doing so, you're not just managing current cash flow issues but also setting up your business for better financial stability in the future.

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Karen Demichelis, MBA

Strategic CFO | CEO Advisor | CPG | Manufacturing & Logistics | Fin Tech | Oil & Gas | Integrator of Innovation | Leadership Architect | Expert Storyteller
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A cashflow forecast requires strategic planning and understanding of key cost drivers. For example, payroll is a hard funding date while vendors have some flexibility. Planning strategically involves understanding your vendors. For example, a vendor such as P&G views not taking an early pay discount as a sign of distress and prioritizes their attention to this matter. Paying on time is irrelevant. Given the influence that P&G has on the grocery market, a supply chain disruption can reverberate. By understanding your supply chain dynamics, you can understand which vendors can be managed and then act accordingly.

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6 Leverage Negotiation

Lastly, don't underestimate the power of negotiation. If you're struggling with cash flow, reach out to vendors and negotiate payment terms that could ease the burden. Some may agree to extended payment terms or installment plans. Prioritize paying those who are less flexible first, while working out terms with others that allow you to manage your cash flow more effectively. Building a reputation for honest communication can lead to stronger vendor relationships and greater flexibility.

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Halisa Lutvi?

Finance Associate | Accountant/ Bachelor's in Organizational Management
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If you anticipate delays in payments, communicate proactively with vendors to manage expectations and potentially negotiate alternative arrangements.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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You're struggling with cash flow in Corporate Accounting. How do you decide which vendors to pay first?

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1 Assess Urgency

2 Evaluate Terms

3 Consider Importance

4 Maintain Relationships

5 Plan Strategically

6 Leverage Negotiation

7 Here’s what else to consider

Corporate Accounting

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