green flags for supplier credit

For small operators in the beauty industry, striking the right balance between stock levels, incoming revenue and supplier outgoings is a tricky beast. Securing supplier credit terms for the brands you work with is a popular way to create flexibility with cash flow while keeping the products your customers love on the shelves. Instead of paying immediately for the stock you’ve ordered, many brands can extend 30, 60 or even 90 day payment terms. 

However, offering credit to new customers is a risk for brands. SurePayd works with lots of credit managers, and they all want to know that you’re a safe bet before offering leeway on payments. 

To help figure out if you’re ready to have a conversation about credit with your suppliers, these are the four biggest “green” flags credit managers are looking for. Sort these out first, and you’re golden!

Good Credit Rating

Although they will be extending you supplier credit as opposed to traditional finance credit, the major companies need to do their due diligence on your before offering terms. And that means checking the credit rating of your business.

Your credit rating is generally based on the past seven years of business activity, and a strong rating will show that you always pay invoices on time and haven’t defaulted on any loans. Have you ever checked on your business credit rating? Talk to your accountant about whether a pre-emptive check is needed.

Paying Invoices Early

Paying your invoices on time is universal business wisdom. But if you’re considering asking for product credit from a key supplier, paying a little early if you can is a good look. Above all, credit managers want to know that you are a safe, reliable payer that won’t cause them to incur costs chasing up overdue invoices. Paying early is a simple way to signal this.

Be strategic about who you pay early, though  – you don’t need to, nor should you, try to do this for every supplier! Make the decision based on what you can comfortably manage.

Resilience to Seasonal Lulls

One incredible Christmas season doesn’t ‘make’ a business! On top of a reliable payment history, credit managers are also keeping an eye out for customers with consistent ordering patterns – an indicator of stable sales. If your stock numbers vary wildly from order to order over a number of years, it can be interpreted as a sign that the business is not yet mature enough for credit and is still highly susceptible to seasonal ups and downs.

On the other hand, predictable orders are a green flag for credit managers – a sign you’re unlikely to be rocked by a single bad month or seasonal lull.

Good Relationships with Their Sales Reps

Relationships are at the heart of the beauty business. Just because you haven’t been dealing with the credit manager from your biggest supplier, it doesn’t mean that your reputation as a customer is a mystery.

Developing a great relationship with your sales reps will seriously improve your chances of securing supplier credit. They will be the ones who go in to bat for you behind-the-scenes, telling the decision makers you’re a joy to work with! While this won’t necessarily overcome a poor credit rating or late payments on its own, it might just get you over the line.

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