Purchasing Strategies

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Your company's purchasing strategies are instrumental to its success. Successful strategies enable you to manage your costs and your inventory, and arrange payment terms consistent with your cash flow rhythm. Effective purchasing strategies require familiarity with prices and product options, as well as building relationships with a range of suppliers.

Buying in Bulk

Most suppliers also offer some type of discount when you buy larger quantities of their products. Buying in bulk offers you the convenience of having plenty of stock on hand as well as lower cost per unit. But having too much stock on hand can be a liability if you've invested so much in bulk purchases that you leave yourself without sufficient liquid cash for day-to-day needs such as payroll. When buying in bulk, weigh the benefits of convenience and price breaks against the potential liability of buying too much for your present purposes.

Inventory Management

In order to purchase effectively for your business, you must be able to manage your inventory by knowing how much stock you have on hand and how long it takes you to go through specific quantities of basic supplies. In addition, you must have a physical infrastructure such as a warehouse or stock room adequate for storing the inventory you buy. If your supplies are perishable, you must also allow space and time to rotate stock order to minimize spoilage. Do not buy so much inventory that it causes unnecessary clutter, even if you're getting a good deal by buying in quantity.

Building Vendor Relationships

Get to know the vendors who supply your business with its basic supplies. Learn about their specialties and shortcomings, as well as their ordering and delivery schedules. Develop a sense of which suppliers can be flexible about considerations such as order deadlines and delivery minimums, and plan your orders according to these parameters. Look for ways to be a good customer in order to make the most out of your vendor relationships. Sometimes a small compromise on your part such as being flexible about your delivery time can make a big difference to a supplier, making it inclined to meet your needs in other ways, such as offering you low prices.

Payment Terms

Negotiate mutually satisfactory payment terms with your suppliers. Some vendors will be willing to offer discounts for prompt payment or cash terms, while others may be inclined to be flexible about payment arrangements. Be realistic when negotiating payment terms; delaying payment isn't necessarily in your best interests if it won't be any easier for you to pay at the end of the allotted billing period. If your business fluctuates according to a relatively consistent monthly schedule, schedule payments during the times of the month when you will be best able to pay.