How to Improve Supplier Relationships with Invoice Factoring

Invoice factoring is often viewed exclusively as a business funding solution, but did you know it can improve supplier relationships, too? Give us a few moments, and we’ll walk you through the basics.

Building Supplier Relationships is Essential

Nearly nine in ten small business owners say supply chain disruptions have had an impact on their company, according to a recent National Federation of Independent Business (NFIB) survey. Shoring up gaps, developing continuity plans, and finding backup suppliers remains an ongoing issue. This, of course, leads to diminished sales for businesses and creates distrust among consumers, causing potentially irreparable reputation damage with lasting consequences.

Equally, businesses that diversify and improve supplier relationships tend to fare better. They face fewer disruptions, experience more innovation, and see lower costs. Considering that brands that reduce supply chain costs from nine percent to four percent can double their profit, per Zippia, it’s a worthwhile endeavor.?

Tips to Strengthen Supplier Relationships

Before digging into invoice factoring as a potential solution, let’s explore general ways to strengthen supplier relationships.

Pay Suppliers on Time

As a business leader, you know all too well how difficult waiting for payment can be. Whether you give your customers 30, 60, 90, or more days, it always seems like they wait until the last minute or until after the payment is late to take care of their invoice. In the meantime, you have your bills to pay. Your vendors feel the same way. Paying them on time or early when you can shows that you respect them and appreciate the value they bring to your business.

Prioritize Effective Communication

Businesses put a lot of weight into meetings. The average person in middle management spends about 35 percent of their time in meetings, while upper management spends around half, per Calendar. While the time may seem excessive, the idea is right. Communication is a big deal. But when did you last talk to a supplier the same way you’d speak to a department head or executive? Start scheduling regular meetings to touch base or arrange a few minutes to talk on the phone on a regular cadence.

Make an Effort to Get to Know Your Suppliers and Collaborate

One of the benefits of effective supplier relationship management is enhanced collaboration. The more an organization works with you and gets to know the nuances of your business, the more able they are to come up with new ideas or ways for you to work together. This type of relationship is common in technology and manufacturing; a supplier that does an excellent job with one part is often brought on to supply more or to help develop new lines. However, it exists beyond these industries. It spurs innovation and helps both companies reach new heights.

However, these situations don’t emerge in the transactional relationships seen between most businesses and suppliers today. They’re seen when the supplier feels valued, heard, and like part of your team. Spend time getting to know your suppliers and find out what they need from you to feel supported. You’re likely to see the behavior reciprocated.

Manage Supplier Expectations

It’s often said that change is the only constant. Your suppliers know this. They understand that your needs will fluctuate, and although it can sting, they understand why you may need to diversify your supply chain. However, you must set the right expectations. Give them a heads up when your needs will likely change and ask them for their insights. If you’re facing a problem, such as repeatedly delayed shipments that may cause you to go elsewhere, respectfully communicate the information. When you’re open, honest, and considerate, your suppliers are more likely to be, too.

How Invoice Factoring Improves Supplier Relationship Management

Invoice factoring involves selling your unpaid B2B invoices to a factoring company at a discount. You receive most of the invoice’s value upfront, and the factoring company sends the rest minus a small factoring fee when your client pays. That way, you’re not stuck waiting weeks or months for clients to pay, and you don’t have to take out loans or accrue debt when money is tight. You simply get paid for the work or goods you’ve already delivered quicker.

Knowing how it works, you may be wondering how factoring affects suppliers. It’s more of an indirect relationship. When your finances are taken care of, and you have adequate working capital, you’re better positioned to nurture supplier relationships.

You Can Pay Suppliers on Time

Factoring is an on-demand funding solution. You don’t need to factor all your invoices or all the time. However, once you’re set up with a factoring company, you can factor as needed to ensure your suppliers are always paid promptly.

You Can Build Supplier Trust

Again, paying on time is the best way to show respect for your suppliers and demonstrate that you appreciate what they do. Taking care of this basic need sets the foundation for a trusting relationship.

Communication Becomes Easier

Few things make conversations more awkward than unpaid balances. If you owe your suppliers, it’s difficult to touch base with them, let alone make requests or tell them you need better service.

You Will Have the Financial Capacity to Increase Your Purchase Volume

At the end of the day, money still talks. You’ll likely get preferential treatment from suppliers the more you spend with them. Because invoice factoring has the potential to spur business growth, which necessitates more supplies, and can allow you to place larger orders, it can help you earn VIP status, too.

Improve Supplier Relationships with Help from Viva

There are many ways to improve supplier relationships. Invoice factoring can help facilitate the process by providing you with working capital. Request a complimentary factoring quote from Viva Capital to learn more or get started.

Original Article: How to Improve Supplier Relationships with Invoice Factoring