Access to Vendor Credit, 6 Ground Rules to Live by
Credit means the difference between life and death, growth and contraction.
Easiest and cheapest source are vendors who would like to do business with you. Over a period of time you can build your lines to a point where they represent a substantial component of your working capital needs.
And if you are ever in a position (customer advances) where you are sitting on large amount of cash for a few weeks, go and get a revolving over draft facility at your local bank.
Remember its easy to get credit, it is difficult to maintain and build that relationship:
a. Ground rule number one is to only borrow what you know can be repaid within the next two billing cycles based on closed revenue producing contracts.
b. Ground rule number two is to set expectations on the lender side by clearly indicating how and when you will clear their invoice.
c. Ground rule number three is to ensure that if you have said a month, you repay on time or a few days earlier.
d. Ground rule number four is to always know your expected net cash position now, 15 days, 30 days, 45 and 60 days later.
e. Ground rule number five is to always over provide for expected overhead in your cashflow calculations. You will always spend more than you expected on your fixed costs.
f. Ground rule number six is to buy occasionaly on cash, when you can. Financially it may make no sense at all but you would be surprised at what it does to your vendor relationship.
Jawwad Ahmed Farid,\r DesiStartup, Blue Screen of Death,\r Alchemy\r http://blog.alchemya.com\r http://bluescreen.alchemya.com\r http://www.alchemya.com
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